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THE 

ECONOMICS  OF  PETROLEUM 


BY 

JOSEPH   E.  POGUE 

Consulting  Engineer 
Co-author  of  America's  Power  Resources;    The  Energy 
Resources  of  the  United  States;    Prices  of  Petro- 
leum and  its  Products  during  the.  War;  etc. 


NEW  YORK 

JOHN  WILEY  &  SONS,  Inc. 

London:  CHAPMAN  &  HALL,  Limited 
1921 


Copyright,  1921, 
By  JOSEPH  E.  POGUE 


PRESS  or 

BRAUNWORTH   &    CO. 

BOOK   MANUFACTURERS 

BROOKLYN.    N.    V. 


Gcolojry 

Library 


T-rs 


TO 

>racc  ^'ccMiam  Poi^uc 


678523 


PREFACE 


The  purpose  of  this  book  is  to  present,  in  perspective,  the  more 
important  economic  facts  relating  to  petrolemii;  to  interpret  the 
changes  that  are  rapidly  taking  place  m  this  field;  and  to  project 
the  trend  of  these  changes  into  the  immediate  future.  The  book  is 
designed  to  be  of  service  to  the  business  man,  the  engineer,  and  the 
practical  worker,  not  only  in  the  petroleiun  industiy,  but  in  those 
industrial  fields  dependent  upon  the  products  of  petroleum  as  well. 

While  the  activities  dependent  upon  petroleum  are  indispensable, 
the  reserves  of  this  substance  are  limited  in  size.  And  the  rate  at 
which  the  supply  may  be  brought  to  the  surface  is  falling  behind  the 
rate  at  which  the  demand  for  oil  is  growing.  These  conditions  have 
already  called  for  large  iinports  from  Mexico.  More  recently,  they 
have  directed  the  attention  of  the  United  States  toward  other 
foreign  supplies  to  supplement  the  domestic  output.  In  the  years 
ahead,  they  may  be  expected  to  bring  on  far-reaching  changes  in 
the  technology  and  economic  structure  of  the  petroleum  industry, 
changes  which  may  even  go  so  far  as  to  influence  strongly  the  inter- 
related industrial  fields  dependent  upon  petroleum.  Many  of  these 
changes,  in  fact,  have  already  registered  their  initial  effects  during 
the  past  five  years. 

Irrespective  of  the  quantity  of  recoverable  petroleum  under- 
ground, the  output  of  this  country  must  inevitably  decline.  This 
decline,  however,  may  be  expected  to  be  a  slow  recession  over  a  con- 
siderable number  of  years,  rather  than  a  sharp  and  sudden  curtail- 
ment. The  peak  of  production  was  possibly  reached  in  June  of  1921. 
That  this  record  will  be  substantially  bettered  is  unlikely,  although 
it  can  doubtless  be  surpassed  if  the  price  of  crude  petroleum  advances 
sufficiently.  But  whether  the  output  of  petroleum  in  the  United 
States  has  actually  or  almost  reached  its  maximum  rate  is  immaterial. 
Likewise,  the  exact  size  of  the  unmined  reserve  is  of  secondaiy 
importance.  The  point  to  be  emphasized  is  the  coming  necessity 
for  increasing  the  over-all  efficiency  of  petroleum — a  problem  that 
concerns  not  only  the  producers  and  refiners  of  oil  but  the  manu- 


vi  PREFACE 

facturers  of  appliances  that  consume  its  products,  as  well.  From 
now  on  the  tendency  will  be  to  use  relatively  less  of  the  material 
itself,  but  to  put  greater  effort  into  increasing  the  service  value 
extracted  from  it. 

In  the  pages  following,  some  departures  have  been  made  from 
the  usual  methods  of  presentation.  The  statistics,  for  the  most 
part,  are  given  in  large  units — an  expedient  that  greatly  simplifies 
their  presentation  and  utilization,  without  any  sacrifice  of  their 
significance.  In  general,  the  unit  has  been  so  chosen  that  the  data 
could  be  expressed  by  three  digits,  with  a  decimal  point  if  necessary, 
the  third  digit  being  raised  one  if  the  fourth  digit  in  the  original 
listing  was  5  or  over.  Special  emphasis  is  placed  upon  graphic 
analysis  of  the  statistical  data,  and  a  number  of  relatively  new  types 
of  charts  have  been  introduced.  The  ratio  chart,  in  particular,  has 
been  extensively  employed.  The  graphic  presentation  has  been  so 
developed  that  the  reader  may  gain  a  perspective  of  the  petroleum 
industry  from  a  study  of  the  charts  alone,  without  recourse  to  the 
text.  The  percentages  and  index  numbers  were  calculated  by  means 
of  a  10-inch  slide  rule  and  are  precise  within  the  limits  of  that  instru- 
ment. The  statistical  tables  have  been  doubly  checked  from  the 
original  data  and  it  is  to  be  hoped  are  reasonably  free  from  errors. 

In  the  preparation  of  this  book,  the  writer  has  been  aided  by 
information  published,  or  especially  provided,  by  many  organiza- 
tions. He  is  particularly  indebted  to  the  following:  American  Gas 
Association;  American  Petroleum  Institute;  Automotive  Indus- 
tries; Federal  Trade  Commission;  National  Automobile  Chamber 
of  Commerce;  National  Petroleum  News;  Oil  and  Gas  Journal; 
Oil,  Paint,  and  Drug  Reporter;  Sinclair  Consolidated  Oil  Corpora- 
tion; Smithsonian  Institution;  Society  of  Automotive  Engineers; 
Society  of  Western  Engineers;  Standard  Oil  Company  (New  Jersey) ; 
Tide  Water  Oil  Company;  U.  S.  Bureau  of  Foreign  and  Domestic 
Commerce;  U.  S.  Bureau  of  Mines;  U.  S.  Fuel  Administration; 
U.  S.  Geological  Survey;  U.  S.  National  Museum. 

A  large  number  of  individuals  have  contributed  to  this  under- 
taking in  a  substantial  manner.  Many  acknowledgments  are  made 
throughout  the  text.  In  addition,  the  writer  wishes  to  express  his 
cordial  appreciation  to:  Ralph  Arnold,  Mowry  Bates,  Philip  Brasher, 
E.  J.  Buchaca,  F.  G.  Clapp,  Northrop  Clarey,  Thomas  Cox,  E.  W. 
Dean,  E.  De  Golyer,  J.  A.  Doyle,  M.  C.  Ehlen,  L.  M.  Fanning, 
V.  R.  Garfias,  Chester  G.  Gilbert,  George  B.  Gifford,  Robert  B. 
Harper,  Frank  Howard,  Arthur  D.  Little,  Isador  Lubin,  Van  H. 
Manning,  H.  F.  Mason,  R.  S.  McBride,  Chester  Naramore,  C.  C. 
Osbon,  W.  F.  Parish,  Ra\Tnond  Prescott,  M.  L.  Requa,  George  E. 


PREFACE  vii 

Richardson,  E.  G.  Sievers,  Walter  C.  Teagle,  David  White,  and 
Samuel  S.  Wyer.  To  Grace  Needham  Pogue  the  writer  is  indebted 
for  the  preparation  of  the  manuscript  for  the  printer,  a  critical 
reading  of  the  proofs,  and  innumerable  suggestions  in  the  course  of 
the  work.  Special  acknowledgment  is  also  due  to  George  Taylor 
and  his  associated  artisans  for  their  effective  work  in  engraving  the 
charts. 

The  writer  is  fully  aware  of  the  difficulties  of  the  task  which  he 
has  attempted  to  perforai,  and  he  will  welcome  constructive  criti- 
cisms from  any  source.  He  offers  no  apology  for  the  projection  of 
present  trends  into  the  future.  "  The  prime  function  of  a  science  is 
to  enable  us  to  anticipate  the  future  in  the  field  with  which  it  has  to  deal.'' 

Joseph  E.  Pogue. 
New  York  City, 
Sept.  15,  1921. 


CONTENTS 


PAGE 

Preface ; v 

CHAPTEB 

I.  The  Economic  Organization  of  the  Petroleum  Industry.  ...  1 

II.  The  Resource  Situation 12 

III.  The  Trend  of  Oil-field  Development 27 

IV.  Trend  of  Oil  Production 48 

V.  The  Transportation  of  Crude  Petroleum 64 

VI.  Trend  of  Refinery  Practice 75 

VII.  Analysis  of  Refinery  Capacity 90 

VIII.  The  Outlook  for  Oil  Refining 104 

IX.  Gasoline 110 

X.  Kerosene 130 

XI.  Fuel  Oil 142 

XII.  Lubricating  Oils 164 

XIII.  Petroleum  By-products 183 

XIV.  Natural  Gas  and  Natural-gas  Gasoline 195 

XV.  Marketing  of  Petroleum  Products 212 

XVI.  Analysis  of  the  Exports  of  Petroleum  Products 222 

XVII.  Prices  of  Petroleuai  and  Its  Products 233 

XVIII.  Relation  bett^':een  Price  and  Production  ofCrude  Petroleum  253 
XIX.  The    Bearing    of    Automotive    Transportation    Upon    the 

Oil  Industry 262 

XX.  The  Economic  Significance  of  Cracking   272 

XXI.  Composite  Motor-fuels 279 

XXII.  The  Motor-fuel  Problem 285 

XXIII.  The  City-gas  Problem 300 

XXIV.  International  Aspects  of  Petroleum 312 

XXV.  Mexico  as  a  Source  of  Petroleum 320 

XXVI.  The  Relation  of  the  Coal  Industry  to  the  Oil  Industry.  .  .  .   330 

XXVII.  Oii^SHALE 336 

XXVIII.  Full  Utilization  of  Petroleum 342 

XXIX.  The  Function  of  Statistics  in  the  Petroleum  Industry.  .  . .  353 


IX 


ECONOMICS  OF  PETROLEUM 


CHAPTER  I 


THE    ECONOMIC    ORGANIZATION    OF    THE    PETROLEUM 

INDUSTRY 

The  petroleum  industry  is  distinguished  among  industrial  activ- 
ities in  its  fomi  as  a  nearly  self-contained  economic  entity  embracing 
the  four  related  functions  of  production,  transportation,  manufac- 
turing and  marketing.  The  economic  organization  of  the  petroleum 
industry,  as  differentiated  from  its  financial  structure,  is  shown 
graphically  in  Fig.  1. 

The  production  of  petroleum  has  to  do  with  the  discovery,  devel- 
opment, and  exploitation  of  oil-bearing  territory.  It  involves  the 
incidental  output  of  considerable  quantities  of  natural  gas,  a  source 
of  supplementary  revenue  and  productive  of  some  gasoline  which  is 
blended  with  the  ordinary  supply  of  refinery  gasoline.  The  pro- 
duction of  crude  petroleum  deals  with  a  wasting  asset,  a  mobile  and 
illusive  substance,  a  product  subject  to  rapid  and  sensational  develop- 
ment; and  takes  on  in  consequence  a  unique  and  specialized  char- 
acter which  sets  it  distinctly  apart  from  industrial  activities  in 
general.  As  time  goes  on,  the  field  of  petroleum  production  may 
be  expected  to  enlarge  its  scope  and  include  the  manufacture  of  oil 
from  volatile  coals  and  oil-shale. 

The  transportation  of  crude  petroleum,  faced  with  the  problem 
of  moving  a  bulky  liquid  raw  material,  has  grown  along  individual 
lines,  with  the  development  of  pipe-lines  and  tank-steamers  to 
facilitate  the  efficient  movement  of  this  substance.  Petroleum  is 
handled  in  almost  entire  independence  of  the  usual  agencies  of 
transport. 

The  refining  of  crude  petroleum  is  a  manufacturing  enterprise 
involving  the  principles  of  chemical  control  and  multiple  production. 
Through  the  agency  of  pipe-line  and  tanker  transportation,  the  sub- 
stantial portion  of  the  refining  activity  has  been  enabled  to  grow  up 
in  locations  readily  accessible  to  the  markets  for  petroleum  products. 


ORGANIZATION   OF   THE   PETROLEUM    INDUSTRY 


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INTEGRATION   OF   THE   INDUSTRY  3 

The  marketing  of  pet  role  vim  products  has  been  carried  on  largely 
by  the  refining  interests,  and  in  order  to  maintain  an  outlet  for  an 
ever-increasing  flow  of  these  materials,  this  phase  of  the  industry 
has  been  extensively  cultivated  and  highly  perfected. 

The  rapid  exploitation  of  the  petroleum  resource  has  led  to  the 
attainment  of  a  notable  degree  of  competence  in  transportation  and 
distribution,  but,  in  the  presence  of  an  abundance  of  raw  material, 
production  and  refining  for  the  most  part  have  developed  in  a 
wasteful  and  improvident  manner.  Conditions  ahead,  however,  may 
be  expected  to  bring  a  growing  measure  of  efficiency  into  the  realms 
of  production  and  refining. 

Integration  of  the  Industry. — In  a  fundamental  economic  sense, 
the  petroleum  industry  is  highly  integrated  and  an  activity  that 
would  be  expected  from  a  purely  physical  standpoint,  to  function 
with  maxinnnn  efficiency  as  a  natural  monopoly.  The  tendency 
toward  financial  integration  in  keeping  with  the  underlying  economic 
structure  was  effectively  displayed  during  the  earlier  decades  of  the 
development,  culminating  in  a  country-wide  business  organization, 
the  Standard  Oil  Company  of  New  Jersey.  The  drift  toward  finan- 
cial integration,  however,  met  the  opposition  of  public  economic 
policy,  and  in  1911  the  Standard  Oil  Company  was  financially  disin- 
tegrated by  a  judgment  of  the  Supreme  Court. 

At  the  present  time,  the  petroleum  industry  is  composed  of  the 
original  units  of  the  Standard  Oil  Company  of  New  Jersey,  operating 
throughout  the  United  States  without  financial  collusion  though 
with  a  certain  degree  of  economic  consistency  arising  from  the 
fundamental  economic  integration  which  could  not  be  destroyed  by 
legal  pronouncement;  and  of  a  larger  number  of  other  dissociated 
units,  including  roughly  about  half  of  the  entire  industry.  The 
companies  originally  comprising  the  Standard  Oil  Company  of  New 
Jersey  are  commonly  referred  to  as  the  Standard  companies,  or 
Standard  group;  while  all  other  companies  are  spoken  of  as  the 
Independents,  or  Independent  group. 

Viewed  from  another  angle,  the  petroleum  industry  is  composed  of 
large  units  representing  corporate  enterprises  with  extensive  aggre- 
gates of  capital,  and  small  units  of  more  restricted  resources  and 
scope.  The  large  units  include  companies  which  produce,  transport, 
refine,  and  market,  as  well  as  those  which  undertake  a  less  complete 
range  of  activities.  The  small  units  usually  operate  in  only  one  of  the 
four  major  divisions.  In  1919  according  to  the  Federal  Trade  Com- 
mission,!  21.3  per  cent  of  the  crude  petroleum  output  of  the  United 

'  Summary  of  the  report  of  the  Federal  Trade  Commission  on  the  Pacific 
Coast  Petroleum  Industry,  April  7,  1921. 


4 


ORGANIZATION    OF   THE    PETROLEUM    INDUSTRY 


States  was  produced  by  nine  Standard  companies;  38.1  per  cent  by- 
large  independent  companies  of  over  1  million  barrels  output; 
and  40.6  per  cent  by  smaller  companies  and  companies  not  reporting 
to  the  Conmiission.  Of  the  total  production  of  the  large  companies, 
25.6  per  cent  was  credited  to  companies  engaged  in  production 
solely;  and  74.4  per  cent,  to  companies  which  also  operated  refineries. 
In  regard  to  the  crude  petroleum  refined  in  1919,  companies  belong- 
ing to  the  Standard  Oil  group  handled  43.8  per  cent ;  large  independent 
companies,  41.1  per  cent;  and  companies  not  reporting  to  the  Fed- 
eral Trade  Commission,  20.2  per  cent.  Figures  covering  84  per 
cent  of  the  refinery  consumption  of  the  country  in  1919  show  that 
38.3  per  cent  of  the  crude  run  to  stills  was  produced  by  the  refining 
companies  or  affiliated  interests.  Of  the  trunk  pipe-line  mileage, 
approximately  69  per  cent  in  1920  was  in  the  hands  of  the  Standard 
companies  and  practically  all  of  the  remainder  belonged  to  large 
independent  interests. 

Size  of  the  Industry. — The  magnitude  of  the  petroleum  industry 
is  difficult  to  convey  accurately  in  statistical  terms.  Table  1  gives 
a  numljer  of  measurements,  some  amounting  merely  to  rough  esti- 
mates, drawn  from  a  variety  of  sources. 


Table   1. — The  Magnitude  of  the  American  Petroleum  Industry 


No.  of  producers  of  crude  petroleum,  Jan.  1,  1921 . 

4,048 

No.  of  producing  oil-wells,  Oct.  31,  1920 

2.58,600 

Production  of  crude  petroleum,  1920 

443  million  barrels 

Imports  of  crude  petroleum,  1920 

105       " 

Pipe-line  companies,  1920 

91 

No.  miles  of  pipe-lines,  1920 

45,500 

Tonnage  of  tank-steamers,  Jan.  1,  1921 

5,215,961 

No.  of  refineries,  Jan.  1,  1921 

415 

Daily  capacity  of  refineries,  Jan.  1,  1921 

1,888,000  barrels 

No.  of  manufacturers  of  natural-gas  gasoline,  1921 . 

432 

Output  of  petroleum  products,  1920 

20  billion  gallons 

No.  of  compounders,  marketers,  and  jobbers,  1920 

1,578 

No.  of  tank-cars  in  operation,  Jan.  1,  1921 

137,000* 

Estimated  value  of  petroleum  products  sold  in  1920 

3  billion  dollars 

Manufacturers  and  dealers  in  oil  equipment 

658 

Estimated  investment  in  American  petroleum  in- 

dustry   

6  billion  dollars 

*  Includes  tank-cars  of  all  kinds  in  United  States  and  Canada. 


INVESTMENT   IN   THE   INDUSTRY  5 

It  is  apparent  that  the  petroleum  industrj'  is  one  of  the  major 
industrial  activities  of  the  country.  Moreover,  it  represents  the  fuel 
support  of  automotive  transportation  and  supplies  the  lubricants 
essential  to  the  operation  of  all  industrial  activities,  and  hence  under- 
writes the  progress  of  modern  civilization.  The  total  wealth  of  the 
country,  including  real  estate,  railroads,  mines,  public  utilities,  and 
so  on,  is  estimated  to  be  in  excess  of  200  billion  dollars,  which  indi- 
cates that  the  estimated  investment  represented  by  the  petroleum 
industr}^  runs  close  to  3  per  cent  of  the  country's  total  wealth. 

Investment  in  the  Industry. — A  rough  appraisal  of  the  investment 
in  the  American  petroleum  industry  has  been  made  by  Ross,^  and 
the  figures  thus  calculated  are  shown  in  Table  2.  It  should  be  borne 
in  mind  that  the  figures  are  approximations  and  useful  merely  as 
indications  of  the  magnitude  of  the  industry  as  measured  in  financial 
terms. 


Table  2. — Estimate  of  the  Investment  in  the  American  Petroleum 
Industry  in  1920  (After  Ross) 


Items 

Millions  of  Dollars 

Production 

Pipe-lines 

3542 
400 
250 

1795 
660 
394 

370 

Tankers 

Refineries 

Marketing  equipment 

Crude  inventories 

Refined  inventories 

Total 

7411 

The  estimate  of  production  represents  the  present  value  of  future 
production,  as  based  on  the  barrel-day  theory  of  valuing  oil  proper- 
ties. According  to  this  method,  the  settled  daily  production  is 
multiplied  by  an  arbitrary  number  of  dollars  called  the  barrel-day 
price,  which  is  usually  the  prevailing  price  times  one  thousand. 
Needless  to  state,  such  a  method  when  applied  to  the  whole  country 
yields  a  highly  generalized  result.  This  method  of  valuation  takes 
no  account  of  increases  in  value  due  to  come  in  respect  to  a  deplet- 
ing resource,  although  such  increments  will  tend  to  be  offset  by 
increasing  production  costs,  and  by  the  time  element  involved  in  a 

1  See  Victor  Ross,  The  Evolution  of  the  Oil  Industry,  1920,  pp.  153-159. 


6  ORGANIZATION   OF   THE   PETROLEUM    INDUSTRY 

slowing  output  after  the  maximum  rate  is  attained.  The  present 
value  of  future  production  represents  an  investment  of  the  petroleum 
industry  in  a  quahfied  sense  only,  since  upwards  of  90  per  cent  of  the 
oil  acreage  in  the  United  States  is  leased  from  private  owners. 

The  actual  investment  in  the  crude  petroleum  business  may  also 
be  estimated  on  the  basis  of  figures  published  by  the  Federal  Trade 
Commission,  showing  that  the  capital  stock,  surplus,  and  funded 
debt  of  82  companies  producing  62  million  barrels  of  crude  petroleum 
in  1919  was  366  million  dollars,  or  5.9  dollars  per  barrel  of  annual 
output.  If  this  ratio  is  applied  to  the  total  1919  production  of  378 
million  barrels,  the  total  estimated  investment  in  the  crude  petro- 
leum business  would  become  about  2200  million  dollars. 

The  pipe-line  system  of  the  country  is  estimated  by  Ross  to  have  a 
1920  replacement  value  of  400  million  dollars,  although  representing 
an  actual  estimated  investment  of  300  million  dollars.  The  U.  S. 
Bureau  of  Mines,  however,  has  estimated  the  pipe-line  investment 
on  the  basis  of  the  actual  cost  of  the  property  to  be  approximately 
500  million  dollars. 

The  refineries  of  the  country,  including  wharves,  railroad  ter- 
minals, cooperage  plants,  tin  container  plants,  foundries,  machine 
shops,  etc.,  are  estimated  by  Ross  to  represent  in  1920  a  total  invest- 
ment of  1795  million  dollars.  On  the  basis  of  reports  from  138  petro- 
leum-refining companies  in  1919  running  84  per  cent  of  the  total 
refinery  consumption  of  the  countrj^  whose  investment  was  given  by 
the  Federal  Trade  Commission  as  2088  million  dollars,  the  total 
investment  of  the  entire  petroleum  refining  industry  would  amount 
to  about  2480  million  dollars. 

The  investment  represented  by  the  American  fleet  of  oil-tankers 
is  placed  by  Ross  at  250  million  dollars  for  1920.  The  original  cost 
of  the  tankers  completed  by  early  1921  will  run  higher  than  this 
total,  since  much  of  the  tonnage  was  built  at  the  height  of  cost. 

The  inventories  of  crude  petroleum  and  refined  products,  as  given 
by  Ross  for  April,  1920,  are  appraised  by  multiplying  the  quantities 
on  hand  at  that  time  by  the  current  market  price. 

The  investment  of  660  million  dollars  represented  by  the  marketing 
equipment,  as  shown  in  Table  2,  is  calculated  on  the  basis  of  4  dollars 
per  barrel  for  the  real  estate  and  equipment  engaged  in  retail  mar- 
keting and  1  dollar  a  barrel  for  tanks  and  docks  employed  in  fuel- 
oil  sales.  Included  under  this  head  are  stations,  warehouses,  barges, 
tugs,  trucks,  tank-wagons,  tank-cars,  sidings,  storage  tanks,  and  so  on. 

The  total  investment  given  by  Ross  is  7.4  billion  dollars.  This 
estimate  may  be  modified  to  the  extent  of  discriminating  between 
the  present  worth  of  oil-lands  and  the  actual  investment  made  by  the 


CAPITALIZATION   OF  THE   INDUSTRY  7 

crude  petroleum  industry  in  them,  and  by  eliminating  from  the  count 
the  value  of  inventories  which  is  an  asset  but  not  strictly  an  invest- 
ment item.  The  total  estimated  investment  would  therefore  become: 
production,  2  billion  dollars;  transportation,  0.75  billion;  refining, 
2  billion;  and  marketing  0.75  billion;  making  a  total  of  5.5  billion 
dollars.  Adding  the  additional  investment  represented  by  foreign 
holdings,  the  total  investment  in  the  American  petroleum  industry 
runs  somewhere  in  the  neighborhood  of  6  billion  dollars. 

The  assets  of  the  petroleum  industry,  in  1921,  as  compiled  by 
the  National  Petroleum  News,^  from  annual  reports  of  the  com- 
panies, was  6  million  dollars,  exclusive  of  companies  having  assets 
under  one  million  dollars.  A  classification  of  assets  by  sizes  of  com- 
panies is  given  in  Table  3. 


Table  3. — Assets  of  the  American  Petroleum  Inditstry  in  1921, 
Compiled  from  Annual  Reports 


Rank 

Number  of 
Companies 

Assets 

Above       $100,000,000 

$50,000,000-$100,000,000 

10,000,000-     50,000,000 

1,000,000-     10,000,000 

12 
16 
36 

28 

$3,772,873,637 

1,147,417,412 

944,689,248 

164,717,016 

Total 

92 

$6,029,497,313 

Capitalization  of  the  Industry. — The  capitnlized  value  of  the 
petroleum  industiy  is  impossible  to  appraise  closely  because  of  the 
large  number  of  unsubstantial  concerns  that  appear  on  the  record. 
An  attempt  has  been  made  to  segregate  capitalization  into  the  portion 
pertaining  to  250  representative  companies,  for  which  the  statistical 
record  is  practically  complete,  and  the  part  relating  to  a  much  larger 
number  of  companies  organized  during  the  past  few  years  whose 
ratio  of  cash  investment  to  capitalization  is  not  known.-  The  first 
group  of  companies  represents  the  conservative  and  substantial 
element  of  the  industry,  while  the  second  group  embraces  the  new- 
comers, some  legitimate,  others  mereh^  stock-promoting  schemes. 

A  comparative  view  of  the  annual  increments  to  the  capitaliza- 
tion of  the  two  groups  of  companies  is  shown  in  Table  4. 

iMay  18,  1921,  p.  41. 

2  The  analysis  in  this  section  makes  use  of  the  figures  presented  by  H.  L. 
Doherty  in  an  address,  "The  Future  of  the  Oil  Business,"  published  by  the 
American  Petroleum  Institute,  Dec.  10,  1920. 


8 


ORGANIZATION    OF   THE    PETROLEUM    INDUSTRY 


Table  4. — Comparison  of  the  Annual  Increase  in  Stock  of  250  Estab- 
lished Oil  Companies  and  Reported  Annual  Capitalization  of  New 
Oil  Companies,  1913-1920  * 

{In  millions  of  dollars) 


Year 

250  Established 

New 

Oil  Companies 

Oil  Companies 

1913 

121 

No  data 

1914 

115 

No  data 

1915 

67 

81 

1916 

272 

419 

1917 

333 

840 

1918 

132 

439 

1919 

707 

3786 

1920 

672 1 

2787 

*  Data  largely  from  H.  L.  Doherty. 

t  New  listings  on  the  New  York  Stock  Exchange  in  1920. 


The  same  range  of  data,  but  on  a  cumulative  basis,  that  is, 
showing  the  capitahzation  outstanding  at  the  end  of  each  year  from 
1913-1920,  is  presented  in  Table  5.  The  capitalization  given  under 
the  heading  of  '*  new  oil  companies  "  is,  of  course,  far  greater  than 
the  paid-in  capital. 


Table   5. — The    Growth   in   Capital   Stock    of   250    Representative    Oil 
Companies  Compared  with  New  Oil  Companies,  1913-1920  * 


Year 

Capital  Stock  250  Established  Companies 

Capital  Stock  New 
Oil  Companies 

Millions  of  Dollars 

Per  Cent  of  1913 
Capitalization 

Millions  of  Dollars 

1913 
1914 
1915 
1916 

1917 
1918 
1919 
1920 

885 
1000 
1057 
1330 

1662 
1794 
2502 
3174t 

100 
113 
119 
150 

188 
203 
283 
358 

No  data 
No  data 
81 
500 

1340 
1779 
5565 

8352 

*  Data  in  part  from  H.  L.  Doherty. 
t  Estimated,  see  Table  4. 


UNIQUE   CHARACTER  OF  OIL  9 

It  is  apparent  from  Tables  4  and  5  that  there  has  been  a  large 
flow  of  capital  into  the  petroleum  industry  during  the  eight-year 
period  under  review.  The  quantity  of  capital  thus  engaged  is 
greater  than  that  listed  under  the  250  representative  companies,  but 
less  than  the  sum  of  the  "  250  estabhshed  companies  "  and  the 
"  new  oil  companies,"  since  the  latter  is  in  part  real  capital  and  in 
part  mere  paper.  If  885  million  dollars  is  accepted  as  a  fair  measure 
of  the  actual  investment  in  the  oil  industry  in  1913,  and  the  growth  in 
the  value  of  the  crude  petroleum  produced  each  subsequent  year  to 
1920  is  a  reasonable  indication  of  the  increasing  capital  requirements 
of  the  industry,  the  actual  paid-in  capital  engaged  at  the  end  of 
1920  may  be  calculated  to  be  approximately  5  billion,  or  2  billion 
dollars  more  than  the  combined  capitalization  of  the  "  250  estab- 
lished companies."  On  the  basis  of  the  tangible  investment  as 
estimated  in  the  preceding  section  the  actual  capital  engaged  in 
the  petroleum  industry  is  around  6  billion  dollars.  Thus  it  would 
appear  that  of  the  1 1  billions  of  capital  (actual  and  paper)  that  have 
been  involved  in  oil,  5  to  6  billion  represents  a  tangible  quantity, 
while  5  to  6  billion  indicates  the  magnitude  of  the  oil  boom. 

In  other  words,  during  the  period  1913-1920,  the  actual  capital 
absorbed  into  the  oil  industry  to  support  its  expansion  was  something 
like  4  to  5  billion  dollars.  During  the  same  period,  the  money  flowing 
out  of  the  oil  industry  in  the  form  of  dividends  was  around  1  billion 
dollars,  leaving  a  difference  of  3  to  4  billion  dollars  as  a  rough  approx- 
imation of  the  net  amount  absorbed. 

Until  a  few  years  ago,  the  oil  industry  to  a  large  degree  financed 
its  expansion  out  of  earnings.  Of  late,  as  indicated  by  the  calcula- 
tions given  above,  the  industry  has  sought  outside  capital  to  help 
sustain  its  growth.  The  ability  to  finance  out  of  earnings  was,  of 
course,  curtailed  by  the  heavy  taxation  and  inflated  money  values 
growing  out  of  the  war  period,  but  with  due  qualifications  for  these 
factors,  the  recent  expansion  of  the  industry  is  to  be  credited  in  sub- 
stantial degree  to  the  inflow  of  outside  capital.  This  matter  is  well 
known  in  oil  circles:  "  Up  to  date  each  inch  of  profit  has  called  for  a 
mile  of  investment  to  insure  there  being  an  inch  of  profit  next  j'ear." 

Unique  Character  of  Oil. — The  estimates  given  above,  as  imperfect 
as  the}'  admittedly  are,  indicate  some  interesting  economic  tendencies, 
which  should  be  studied  in  relation  to  certain  characteristics 
peculiar  to  the  development  of  petroleum.  The  oil  industry  has 
to  deal  with  three  characteristics  lacking  or  at  least  not  so  highly 
developed  in  other  industrial  enterprises.  These  are :  A  rapid  deple- 
tion of  a  given  source  of  crude-oil  supply,  calling  for  careful  account- 
ing if  a  net   profit  is  to   be  shown  after  final  liquidation  of   the 


10 


ORGANIZATION   OF   THE   PETROLEUM    INDUSTRY 


investment;  a  shifting  base  of  supply,  leading  to  a  rapid  obsoles- 
cence of  transportation  and  refinery  installations;  and  a  rapidly 
changing  demand,  likewise  contributing  to  a  speedy  obsolescence  of 
material  developments.  It  is  questionable  whether  these  factors 
have  been  given  due  allowance  in  oil  accounting. 

Profits  of  the  Petroleum  Industry.— The  substantial  portion  of  the 
petroleum  industry  has  proved  to  be  a  very  profitable  activity.  The 
dividends  paid  annually  by  250  representative  companies  from  1912 
to  1919  are  given  in  Table  6. 


Table  6. — Dividends  Paid  by  250  Representative  Oil  Companies  by  Years, 

1912-1919  * 


Dividends, 

Rate  on  Capital  Stock, 

Millions  of  Dollars 

Per  Cent 

1912 

64 

8.43 

1913 

93 

10.. 52 

1914 

75 

7.49 

1915 

78 

7.41 

1916 

121 

9.06 

1917 

1.50 

9.01 

1918 

159 

8.88 

1919 

166 

6.62 

*  Data  from  H.  L.  Doherty,  The  Future  of  the  Oil  Business,  Amer.  Petr.  Inst.,  Bull.  132, 
Dec,  1920. 

Figures  compiled  by  the  Federal  Trade  Commission  ^  for  1919 
show  higher  earnings  than  those  given  in  Table  6.  For  example, 
82  producing  companies,  turning  out  about  16  per  cent  of  the  coun- 
try's total  output  of  crude  petroleum  and  representing  an  investment 
of  366  million  dollars,  showed  earnings  at  the  rate  of  17.7  per  cent 
upon  this  investment.  Fourteen  of  these  companies,  comprising 
2.6  per  cent  of  the  total  production  of  the  group,  showed  a  loss  of 
2.8  per  cent  upon  their  invested  capital;  while  14  other  companies, 
representing  an  output  of  37.3  per  cent  of  the  total  for  the  group, 
enjoyed  profits  of  over  30  per  cent.  Thus  the  tendency  for  earnings 
to  run  higher  in  the  case  of  larger  companies  is  displayed. 

Figures  published  by  the  Federal  Trade  Commission  in  1919 
covering  138  petroleum  refining  companies,  representing  an  invest- 
ment of  2088  million  dollars  and  a  refinery  consumption  of  84  per 
cent  of  the  country's  total,  show  an  average  profit  of  16.8  per  cent. 
Of  this  group  28  small  companies  representing  1.9  per  cent  of  the 

1  Summary  of  report  on  the  Pacific  Coast  Petroleum  Industrj',  April  7,  1921. 


CONCLUSION  1 1 

total  investment  of  the  group  and  3  per  cent  of  the  total  refinery 
consumption  of  the  group,  showed  a  loss  of  8.5  per  cent;  while  28 
large  companies  representing  22.2  per  cent  of  the  total  investment 
and  22.5  per  cent  of  the  total  refinery  consumption,  enjoyed  earnings 
of  34  per  cent.  Five  companies  of  the  group  with  an  investment  of 
over  100  million  dollars  each  showed  an  average  rate  of  earning  of 
24.6  per  cent. 

Conclusion. — Under  the  impetus  of  the  profitable  nature  of  the 
oil  business,  the  industry  has  expanded  with  notable  rapidity,  at 
first  supporting  its  growth  from  the  wealth  created  by  its  own  efforts, 
later  calling  upon  outside  capital  to  lend  assistance.  Such  a  course 
is  economically  sound  during  a  period  of  youthful  development, 
if  ultimately  terminated  by  a  period  of  productivity  in  which  the 
flow  of  capital  is  reversed.  Otherwise  the  activity  will  become  per- 
manently dependent  upon  outside  agencies  of  production,  an  eco- 
nomic anomaly  impossible  of  attainment. 

In  absorbing  of  recent  years  more  capital  than  it  has  concur- 
rently produced,  the  oil  industry  as  a  w^hole  has  considerably  over- 
expanded  in  respect  to  the  quantity  of  raw  material  apparently 
available  for  maintaining  future  operations.  If  this  interpretation 
is  correct,  it  means  either  an  ultimate  financial  loss  on  the  part  of  all 
activities  not  soundly  developed  in  respect  to  raw  material,  or  else 
such  an  elevation  in  price  level  as  will  carry  for  a  time  much  of  the 
unsound  development  at  a  reduced  capacity.  The  outcome  will 
probably  represent  a  compromise  between  the  two,  with  a  period 
of  price  inflation  preceding  an  era  of  liquidation,  with  the  possibility 
of  complications  resulting  in  a  revision  in  the  economic  structure  of 
the  entire  industry. 


CHAPTER  II 
THE  RESOURCE  SITUATION  i 

Character  of  Petroleum. — Crude  petroleum  is  a  rrrineral  readily 
separable  into  liquid  fuels,  viscous  compounds  useful  for  lubrication, 
and  other  products  entering  into  the  arts  in  a  number  of  forms. 
Chemically,  it  is  dominantly  composed  of  carbon  and  hydrogen, 
with  a  small  percentage  of  nitrogen,  sulphur,  and  oxygen  which  rank 
as  impurities.  The  carbon  and  hydrogen  are  combined  in  an  almost 
infinite  variety  of  ways,  forming  endless  numbers  of  hydrocarbon 
compounds  that  challenge  the  analytical  skill  of  the  chemist. 

According  to  Maber^",^  petroleum  is  composed  of  vars'ing  mix- 
tures of  five  major  series  of  hydrocarbons,  each  with  a  distinctive 
relationship  betw^een  the  nu'mber  of  carbon  and  hydrogen  atoms 
present.  These  are  (1)  the  paraffin  series,  Cnii2n+2,  comprising 
the  main  portions  of  the  gasoline,  kerosene,  and  wax  of  commerce; 
(2)  the  naphthene  series,  C„H2n,  a  closed-chain,  or  cychc,  type  of 
hydrocarbon,  especialh'  characteristic  of  petroleums  yielding  asphaltic 
residues  upon  distillation;  (3)  a  series  of  the  formula  C„H2n-2, 
represented  particularly  in  the  lighter  petroleums,  having  some 
viscosity  and  forming  lubricating  distillates  of  light  to  medium  bod}-; 
(4)  a  series  of  the  fomiula  C«H2n-4,  typical  of  the  asphaltic  petro- 
leums and  forming  the  "constituents  of  the  best  lubricants  it  is 
possible  to  prepare  from  petroleum";  and  (5)  the  aromatic  series, 
CnHo/z-e,  cyclic  in  character  like  the  naphthenes  and  regarded  as  a 
detriment  to  be  removed  in  refining. 

In  practice,  the  various  types  of  petroleum  are  regarded  as  falling 
into  three  classes:  the  paraffin-base  petroleums,  especially  rich  in  the 
hydrocarbons  of  the  CnH2n+2  and  C„H2«-2  series;  the  asphalt-base, 
or  more  properly  the  naphthene-base,  petroleums,  consisting  mainly 
of  the  hydrocarbons  of  the  C„H2«,  C„H2n-4,  and  to  some  degree  of 
the  CnHon-e  series;    and    intermediate  types.     The    paraffin-base 

1  For  a  general  analysis  of  the  petroleum  resource,  see  Gilbert  and  Pogue, 
Petroleum:  A  Resource  Interpretation,  Bull.  102,  Pt.  6,  U.  S.  National  Museum, 
1918. 

-  Composition  of  Petroleum  and  its  Relation  to  Industrial  Use,  American 
Institute  of  Mining  and  Metallurgical  Engineers,  Publ.  No.  158,  February,  1920. 

12 


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Abilfloe 69  Tes. 

Ada 44  Okla. 

Adftir 27  OklB. 

Alleo 43  Okla. 

AUendsle 3  III. 

AUuwe 27  Okla. 

AltaVista 80  Te«. 

Anec  LaButtc 117  La. 

AugUBtn 17  Kan. 

Avant-RamoDn Z6&  Okla. 

AviB 55  Te«. 

BadKerBaein 1  Wyo. 

Bald  Hill 3G  Okla. 

Bangs 70  Tex. 

Barbera  Hill 08  Te«. 

Bartlesville 26  Okla. 

BarUctt 39  Okla. 

Batson 100  Tei. 

B&xt«r , . . ,  27  Wyo. 

Beaumont 18  Kan. 

BelridK« 3  Cal. 

Bt(Hill 87  Tei, 

Big  Hill 101  Tei. 

Big  Muddy 21  Wyo. 

Big  Piney 28  Wyo. 

Big  Band  Draw 18  Wyo. 

Billinga 23  Okla. 

Bird  Crerk 32  Okla. 

Birds-Flat  Rock 7  lU. 

Black 61  Tex. 

BlackwcU 20  Okla. 

BlueRidicc 03  Tex. 

BonaniB 8  Wyo. 

Boulder 35  Colo. 

Breokenridge 61  Tex, 

Broken  Arrow 33  Okla. 

BrowDwood 68  Te«. 

Buck  Creek 19  Wyo. 

Bud  Kimball g  Wyo. 

Bull  Bayou 107  U. 

Burbank 26b  Okla. 

BurkburneU 48  Tex. 

Byrd'B 60  Tex. 

Byron 3  Wyo. 

Caddo 103  La. 

Caddo 62  Tex. 

Canary 36  Okla. 

Carlyle 2  111. 

Caamalia 7  Cal. 

Cat  Canyon 7  Cal. 

Cat  Creek l  Mont. 

Chanute g  Kan. 


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Wyo. 

Wyo. 
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Wyo. 
Kno. 
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Wyo. 

Wyo. 

Wyo. 
Ohio 
Wyo. 

Grayford 

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La. 

Wyo. 
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Wyo. 

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Ky. 

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Kan. 
Kan. 
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Kan. 
Lt. 

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Okla. 

Okla. 
Okla. 

I.a. 

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Tei. 

Wyo. 

Okla. 
Okla. 
Wyo, 

Ky. 
OkU. 
Tei. 
Kan. 
Wyo. 
Cal. 
Wyo. 
Wyo. 
Wyo, 

Wyo, 
Okla. 

Sheep  Mount.i 

16 

Wyo. 

34 

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Skialook 

33 

13 

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Som  rset 

82 

T«». 

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40 

MuikoSse 

Neodcaha 

New'beria 

..'.  I 

S  u    L  ke 

100 

Colgate 

Hftyncsville 

...    104. 

South  Bend 

62 

CoaliDga 

South  Bosque. 

Kpeechly 

7 

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Tei. 
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18 

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Newkirk 

21 

27 

101 

NortkTulaa 

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Copan 

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Ta. 
Wyo. 

OilCily 

Okxa 

:::  2° 

...    107a 

26 

52 

...     83 

104 

Stratlon  Ridge 

89 

28 

Hoskin. 

...      90 

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'Jweetwater 

OuBchiU 

110 

Tabor 

Damon  Mound... 

...      92 
...     09 

Humble 

Humboldt 

Independence  

iDialla 

Iol> 

...     00 

Okla 

Dayton 

..     , 

_ 

Taneha 

30 

Dkla. 

Peabody 

...      13 

Ten  Sheep..,. 

j„» 

Wyo. 

64 

...    106 

PiedrasPinlaa.... 
Pierce  Junclion.... 

:::  « 

Thcrmopolis,  . 

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Wyo. 

tea., 

Douglas 

'.'.'.     47 

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55 

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Thrall 

76 

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Trickham 

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Turley 

Upton  Thorntoi 
Upper  Lawrence 

,  , .      71 

32 

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8 

Jackson  Ridge.... 

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5 

Tea. 

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111 

Poleaii 

41 

Elbing 

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Powder  River 

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Kirkwood 

Unee  Creek 

Lark 

LawtoD 

...       6 

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Pyramid  Fossil 

..      29 

111. 

Electra 

Cal. 

Virgil 

Vivian 

Wagon  Hound. 

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Rariter 

J, 

Rantout 

...  115 

Rawhide 

10 

Loco 

7 

Wyo. 

32 

Lompoe 

...       7 

19 

36 

RockSprinxa 

■      27 

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33 

Okla. 
Wyo. 

Kan. 
La. 

Warm  Springs.. 

...  12 

60 

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McDonald 

MoKittriek 

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20 

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Salt  Lake 

Sandoval 

SanU  Ann. 

SanU  Maria 

Sapulpa 

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II 

rsislll 

OCCURRENCE  OF   PETROLEUM  13 

crudes  are  rich  in  gasoline  and  wax,  and  j^ield  the  bulk  of  the 
lubricants  produced;  the  asphalt -base  crudes  are  low  in  gasoline, 
yield  for  the  most  part  notable  percentages  of  asphalt,  and  although 
rich  in  viscous  hydrocarbons  are  not  so  extensively  emploj-ed  in 
the  manufacture  of  lubricants;  the  intermediate,  or  mixed-base, 
petroleums  share  the  characteristics  of  the  other  two.  As  may 
be  readity  inferred  from  the  carbon-hydrogen  ratio,  the  paraffin 
petroleums  are  lighter  in  weight  and  more  fluid  than  the  asphaltic 
petroleums. 

Occurrence  of  Petroleum. — Petroleum  occurs  in  the  crust  of  the 
earth,  filling  the  interstices  and  crevices  in  certain  types  of  stratified 
rocks,  particularly  sandstones  and  limestones.  It  usually  holds  in 
solution  notable  quantities  of  natural  gas  under  pressure,  which  adds 
to  the  mobility  of  the  oil.  Salt  water  is  customarily  in  close  asso- 
ciation with  the  oil,  contributing  materially  to  the  difficulties  of 
exploitation. 

Petroleum  is  in  aU  probability  the  natural  product  of  animal  and 
vegetable  matter  buried  in  sedimentary  formations  of  the  geologic 
past.  The  various  theories  accounting  for  its  origin  are  notable 
for  agreeing  that  the  oil  has  migrated  from  its  parent  abode  to  its 
present  points  of  occurrence.  Lighter  than  water  with  which  the 
rock  fomiations  are  usually  saturated,  the  oil  and  gas  tend  to  migrate 
upward,  working  their  way  to  porous  beds  and  following  freely 
their  course  until  arrested  by  a  downward  curvature  or  impervious 
capping.  Thus  an  oil  pool  is  usually  a  body  of  convex  shape  like  an 
inverted  basin,  lying  under  the  crest  or  dome  of  an  impervious  layer 
of  rock.  Nomially  the  order  of  occurrence  is  gas  just  below  the 
crest,  then  oil,  and  finally  water  buoying  up  the  oil  with  its  support 
from  below.  Where  water  is  lacking,  as  in  portions  of  the  Appa- 
lachians, the  oil  tends  to  accumulate  in  the  structural  synclines 
rather  than  under  the  domes  or  anticlmes. 

The  conditions  under  which  petroleum  occurs  in  the  United  States 
have  been  so  extensively  studied  b}-  methods  of  geological  engineering 
that  the  areas  of  the  producing  and  prospective  fields,  the  number, 
depth,  and  thickness  of  the  oil-bearing  formations,  and  the  physical 
characteristics  of  the  productive  territory  are  already  known  in  con- 
siderable detail. 

Distribution  of  Petroleum.^ — The  extent  of  the  known  oil-pro- 
ducing territory  of  the  United  States  is  given  in  Fig.  2,  while  in  Fig.  3 
are  shown  the  principal  pools  and  producing  centers.     There  are  seen 

*  The  description  of  American  oil-fields  presented  in  this  section  is  taken 
with  slight  modification  from  a  pamphlet  entitled  "The  Outlook  for  Petro- 
leum," published  by  Arthur  D.  Little,  Inc.,  in  1920. 


14 


THE   RESOURCE   SITUATION 


DISTRIBUTION  OF   PETROLEUM  15 

to  be  seven  major  ftelijs:  The  Appalachian,  Lmia-Indiana,  lUinois, 
Mid-Continent,  Gulf,  Rocky  Mauntain,  and  Cahfornia.  The 
Texas  and  Louisiana  districts,  other  than  those  occurring  along  the 
coast  which  constitute  a  type  to  themselves,  belong  with  the  Kansas- 
Oklahoma  area  as  extensions  of  the  great  Mid-Continent  field.  The 
recent  prominence  of  the  Texas-Louisiana  group,  however,  suggests 
separate  consideration. 

The  Appalachian  field  is  the  country's  oldest  and  most  consistent 
producing  source.  Its  history  dates  back  to  the  discovery  well  in 
1859  on  the  Drake  farm  at  Titusville,  Pennsylvania,  which  marked 
the  beginning  of  the  American  petroleum  industry.  Little  or  nothing 
was  known  of  oil  geology  at  the  time  and  the  complexities  of  the 
Appalachian  structure  were  slow  in  being  worked  out.  In  conse- 
quence its  numerous  pools  were  located  at  scattered  intervals  of  time 
and  for  forty  years  new  production  continued  to  more  than  offset 
the  waning  output  of  the  older  districts.  Since  1900,  however,  the 
net  tendency  has  been  reversed.  Production  in  this  field  has  been 
on  the  down  grade  and  its  output  to-day  is  little  more  than  half  the 
figure  that  characterized  the  field  at  its  prime. 

The  Appalachian  field  comprises  a  great  spoon-shaped  structural 
basin  with  limits  established  without  possibility  of  important  exten- 
sions. Within  this  basin  the  oil  and  gas,  where  accompanied  by 
water,  accumulated  beneath  the'  crests  of  secondary  folds;  but 
where  water  was  absent  the  two  parted  company,  the  gas  rising 
to  the  crests  and  the  oil  sinking  to  the  depressions.  The  bottom  of  the 
basin  represents  the  most  productive  area  and  underlies  the  West 
Virginia  Panhandle,  where  the  basin  has  a  width  of  about  150  miles. 
To  the  northeast  and  the  southwest  it  not  only  narrows  but  becomes 
less  productive  until  it  terminates  in  southwestern  New  York  and 
in  a  scattering  of  outliers  in  Kentucky  and  northern  Tennessee. 

New  pools  in  the  Appalachian  basin  continue  to  be  located  from 
time  to  time,  particularly  in  Kentucky,  but  the  structure  has  been 
determined  and  tested  to  such  a  degree  that  considerable  extensions 
are  extremely  improbable.'  The  chief  factor  responsible  for  the  sus- 
tained output  is  that  pumping  may  be  profitably  conducted  to  the 
very  last  of  the  oil  underground.  Thus  the  larger  share  of  the  field's 
output  is  drawn  from  a  multitude  of  small  wells  intermittently 
pumped  from  sump  accumulations. 

The  Lima-Indiana  field,  the  second  oldest  source  of  American 
petroleum,  affords  an  interesting  variant  from  the  usual  occurrence 
in  which  the  oil  is  found  in  porous  sandstones  or  "  sands."  There 
the  oil  occurs  in  limestone.  In  a  regional  sense,  this  field  holds  a 
structural  relationship  to  its  neighbor  to  the  east.     The  Appalachian 


16  THE  RESOURCE   SITUATION 

field  occupies  a  geosyncline,  or  great  structural  basin,  between  the 
mountainous  Appalachian  uplift  on  the  east  and  the  gentle  Cincin- 
nati uplift  on  the  west.  The  Lima-Indiana  accumulation  of  oil  was 
found  toward  the  crest  of  the  Cincinnati  uplift  underlying  subordinate 
domes  where  the  limestone  had  suffered  alteration  to  a  porous  mag- 
nesian  variety.  The  field  was  discovered  in  1886,  reached  its  crest 
of  production  two  decades  later,  and  has  been  on  the  decline  ever 
since.  The  structure  has  been  worked  out  and  the  possibilities 
explored  to  such  a  degree  that  nothing  other  than  a  continued  decline 
to  extinction  may  be  expected. 

The  Illinois  field  includes  the  great  structural  arches  next  to  the 
west  and  the  pools  underlie  the  secondary  convexities  in  the  major 
system.  Drilling  quickly  took  the  measure  of  the  field,  once  it  was 
discovered  in  1905,  and  brought  it  to  its  prime  in  five  years.  Since 
1910  it  has  been  steadily  declining  and  no  revival  is  in  prospect. 

The  Gulf  Coast  field,  discovered  in  1900,  reached  its  apparent 
prime  only  five  years  later  and  thereafter  declined  with  minor  fluc- 
tuations until  the  bringing  in  of  new  pools  in  1913  renewed  its  vigor. 
In  consequence  its  current  rate  of  output  is  nearly  three  times  that 
of  its  apparent  declining  years  and  nearly  equal  the  peak  of  fifteen 
years  ago.  The  pools  are  found  beneath  a  pecuHar  type  of  local 
uplift,  called  domes,  similar  to  those  in  which  salt  and  sulphur 
occur  in  commercial  quantities.  These  domes  are  not  a  definite 
part  of  any  great  structural  system,  but  are  of  local  development  and 
usually  give  no  surface  indications  of  their  presence.  The  discovery 
of  new  pools,  accordingly,  is  largely  contingent  upon  fortunate 
drilling.  This  is  what  brought  about  the  rejuvenation  of  the  field, 
and  the  history  of  the  past  few  years  may  repeat  itself.  But  the 
area  on  the  whole  is  not  extensive  and,  excepting  the  famous  Spindle 
Top  pool,  the  individual  occurrences  are  not  sensationally  large; 
so  it  is  quite  improbable  that  the  field  will  ever  substantially  enlarge 
upon  its  present  output. 

Two  small  pools  in  Colorado  discovered  in  1876  first  called  atten- 
tion to  the  existence  of  a  Rocky  Mountain  field.  Their  combined 
output,  however,  was  insignificant  until  the  discovery  of  the  Salt 
Creek  pool  in  Wyoming  renewed  interest  in  the  field  and  led  to 
a  steadily  increasing  production  which  in  1920  approached  the  20 
million  barrel  mark.  The  Rockj-  ^Mountain  field  is  still  undoubtedlj' 
in  its  youth  and  susceptible  of  extension.  Considerable  effort  has 
been  expended  in  determining  possible  oil  structures  not  only  in 
Wyoming,  but  in  Montana,  Utah,  and  New  Mexico  as  well,  where 
general  geological  conditions  are  favorable  to  the  presence  of  oil. 
The  mode  of  occurrence  conforms  to  the  structural  anticlines  that 


DISTRIBUTION   OF   PETROLEUM  17 

wall  off  the  great  structural  basins,  and  the  boldness  of  the  exposures 
sunpUfies  the  work  of  interpreting  the  latent  possibilities  of  the  field. 
Without  specifying  the  results  in  detail,  they  may  be  said  to  hold 
out  hope  of  finding  additional  sources,  but  structures  on  the  Appa- 
lachian and  Mid-Continent  scale  of  magnitude  are  lacking.  From 
the  surveys  made  it  is  possible  to  appraise  the  future  of  the  field  in  a 
general  way  and  to  venture  the  prediction  that  the  output  can  scarcely 
be  expected  to  exceed  40  million  barrels  as  an  annual  maximum. 

The  California  field  was  brought  into  action  in  1898  and  has  been 
steadily  increasing  in  importance  ever  since,  with  a  temporary  slump 
in  1915.  The  present  annual  production  rate  of  approximately  100 
milHon  barrels  exceeds  the  combined  output  of  the  five  fields  thus  far 
discussed,  and  represents  nearly  a  quarter  of  the  country' 's  total. 
The  areal  extent  of  the  fields  is  not  in  keeping  with  its  producing 
importance,  but  the  pools  are  characterized  by  a  tremendous  and 
sustained  capacity.  The  limits  of  the  field  can  scarcely  be  said  to 
have  been  entirely  determined,  but  the  possibility  of  finding  a  suc- 
cessor to  the  Midway  Sunset  district  is  distinctly  remote  and  more 
than  passing  significance  is  to  be  attached  to  the  general  flattening 
of  the  production  curve  since  1913.  (See  Fig.  21,  p.  55.)  On  a 
larger  scale,  the  field  promises  to  reproduce  the  past  history  of  the 
Lima-Indiana  and  Illinois  fields  from  around  1902  and  1908  respect- 
ively, which  is  to  say  that  the  next  three  years  will  see  the  field  set 
for  a  slow  but  sure  decline. 

The  Mid-Continent  field  is  the  latest  and  greatest  of  the  country's 
producing  sources  to  come  into  prominence.  The  principal  product- 
ive area  extends  from  Kansas  City  south  across  eastern  Kansas  and 
Oklahoma  with  extensions  into  northern  and  central  Texas  and  north- 
western Louisiana,  which  are  commonly  treated  separately  in  view 
of  their  recent  prominence.  After  a  sensational  early  development 
between  1903  and  1907,  the  field  steadied  down  to  a  substantial 
growth  during  the  next  few  years  only  to  have  a  second  sensational 
boom  ushered  in  b}^  the  phenomenal  Cushing  district  in  1914. 
Recently  the  center  of  attraction  has  shifted  to  the  pools  in  Texas 
and  Louisiana. 

The  mode  of  occurrence  is  definitely  related  to  the  structure 
which,  unlike  that  of  the  Gulf  Coast  area,  is  for  the  most  part  dis- 
cernible at  the  surface.  It  is  generally  conceded  that  such  new  pools 
as  await  discovery  in  Kansas  and  Oklahoma  are  in  the  nature  of 
outliers.  The  Texas  and  Louisiana  extensions  unfortunately  have 
shown  themselves  to  be  disappointingly  short-lived  with  a  disposition 
to  go  to  water  quickly.  Unless  there  arc  unknown  i-eserves  of  a  dif- 
ferent order,  a  prospect  out  of  keeping  with  what  is  already  known  of 


18  THE   RESOURCE   SITUATION 

the  geologic  structure,  or  unless  important  extensions  can  be  quickly- 
found  to  the  northwest  or  the  southwest,  which  seems  unlikely  on  a 
large  scale,  the  increment  added  from  year  to  year  by  outliers  cannot 
long  continue  to  offset  the  waning  output  of  the  great  pools  toward 
the  center  of  the  field.  What  has  been  said  of  the  great  California 
field  bids  fair  to  hold  even  more  assuredly  of  the  still  greater  Mid- 
Continent  source.  Production  here  has  been  unduly  forced  by 
the  oil-boom  of  1919-20  and  is  misleading;  but  this  cannot  con- 
tinue, and  the  production  curve  is  due  shortly  to  round  off  and  begin 
a  long  course  downward  like  that  of  the  fields  to  the  east. 

From  this  brief  review  of  the  producing  fields,  it  is  seen  that  of 
the  seven  domestic  sources  three  are  in  a  state  of  hopeless  decline; 
one  is  largely  an  unknown  quantity;  the  two  greatest  are  at  their 
best;  and  just  one,  the  Rocky  Mountain  field,  is  assuredly  still  in  its 
youth. 

The  Unmined  Supply  of  Petroleum  in  the  United  States. ^ — 
The  portion  of  the  petroleum  resource  of  greatest  interest  is  that  not 
yet  used,  for  the  unmined  supply  must  support  the  future.  With  the 
growth  of  geological  knowledge  regarding  the  character  and  location 
of  oil-bearing  formations,  attention  was  naturally  attracted  to  esti- 
mates of  the  oil  underground;  and  as  early  as  1908  Day,  then  in 
charge  of  the  petroleum  statistics  in  the  U.  S.  Geological  Survey, 
calculated  the  total  quantity  of  oil  originally  available  in  the  ground 
in  the  United  States  as  ranging  between  a  minimum  of  10  billion 
barrels  and  a  maximum  of  24.5  billion  barrels.  (For  purposes  of 
comparison  it  should  be  recalled  that  our  present  annual  require- 
ments are  slightly  above  one-half  billion  barrels.)  Day's  estimate 
was  based  upon  data  accmnulated  by  the  Survey  in  the  course  of 
extensive  field  investigations,  but  at  the  time  the  drill  had  not 
penetrated  some  of  the  richest  oil-pools  in  the  countiy. 

Again,  in  1915,  Arnold  revised  the  inventory  made  by  Day,  in 
the  light  of  the  additional  engineering  data  and  the  advance  in 
geological  science  that  had  developed  in  the  meantime.  And  the 
period  between  1908  and  1915,  it  should  be  noted,  was  marked  by  an 
intensive  development  in  which  new  oil-producing  territory  was 
opened  up  and  the  older  areas  were  more  closely  studied.  Arnold 
placed  the  original  supply  at  approximately  9.1  billion  barrels,  thus 
somewhat  reducing  Day's  minimum. 

A  third  estimate  was  made  by  the  geologists  of  the  oil  and  gas 
section  of  the  U.  S.  Geological  Survey  in  1916  in  response  to  a  Senate 
resolution,  and  this  estimate  placed  the  original  supply  at  11.2  billion 

1  A  further  discussion  of  this  topic  will  be  found  in  Gilbert  and  Pogue, 
America's  Power  Resources,  New  York,  1921,  pp.  249-258. 


UNMINED  SUPPLY  OF  PETROLEUM  IN  UNITED  STATES       19 

barrels.  In  the  spring  of  1917  the  matter  was  carefull}^  reconsidered 
"  with  marked  conservatism  "  by  the  same  geologists,  each  studying 
the  regions  with  which  he  had  field  acquaintance,  with  the  result 
that  the  original  supply  was  reduced  to  10.1  billion  barrels. 

Finally,  in  late  1918,  the  whole  appraisal  was  recalculated  by 
David  White  and  his  associates  on  the  Geological  Survey,  in  the  light 
of  still  further  information,  and  the  conclusion  was  reached  that  the 
original  supply  of  available  oil  in  the  ground  was  approximately  11.3 
billion  barrels.^ 

These  five  estimates  may  be  tabulated  for  comparison : 


Table  7. — Estimate  of  the  Original  Supply  of  Crude  Petroleum 
IX  THE  United  States 


Year 

Unmined  Supply 
(In  billions  of  barrels) 

1908 
1915 
1916 
1917 
1918 

10-20. -t 

9,1 

11.2 

10.1 

11.3 

The  striking  feature  of  the  comparison  is  that  the  development 
work  of  the  ten-year  period,  which  so  markedly  increased  the  pro- 
dudion  of  crude  petroleum,  did  not  materially  enlarge  the  apparent 
size  of  the  resource. 

The  dependability  of  such  estimates  has  been  widely  questioned, 
and  none  would  be  readier  than  the  sponsor  geologists  themselves  to 
disclaim  exactitude  or  finalit}'  for  the  figures.  But  the  fact  remains 
that  successive  estimates  of  the  unmined  supply,  in  spite  of  the 
enlarging  acreage  sounded  by  the  drill,  do  not  materially  increase 
the  total.  And  while  the  margin  of  error  may  be  conceded  to  be  as 
much  as  50  per  cent,  or  even  100  per  cent  to  allow  for  contingencies, 
the  important  point  is  the  smallness  of  the  domestic  resource  upon 
which  our  petroleum  requirements  are  dependent. 

Up  to  January  1,  1921,  the  United  States  has  produced  5.4  billion 
barrels  of  petroleum.  Suljtracting  this  quantity  from  the  original 
supply  of  11.3  billions,  we  have  left  as  a  working  reserve  5.9  billion 
barrels,  with  an  annual  consumption  requirement  running  well  above 
the  half  billion  mark.  The  Chief  Geologist  of  the  U.  S.  Geological 
Survey  in  1920  was  quoted  as  believing  it  fair  to  consider  6.5  billion 

'  David  White,  The  Unmined  Sujjply  of  Petroleum  in  the  United  States, 
Society  of  Automotive  Engineers,  February,  1919. 


20 


THE   RESOURCE   SITUATION 


barrels  as  conservative  and  8  billion  as  an  improbable  maximum.^ 
But  double  or  even  treble  the  size  of  the  reserve,  and  the  resource 
situation  still  remains  serious,  if  not  critical.  Even  repudiate 
entirely  the  geologist  and  all  his  works,  and  there  still  remain  the 
production  facts  to  reckon  with,  which  tell  us  that  the  rate  of  extrac- 
tion must  soon  slow  down,  irrespective  of  the  unmined  supply. 

A  decline  curve  for  the  country  as  a  whole,  picturing  the  resource 
depletion,  is  presented  in  Fig.  4. 


10   BILL 

JON    BARRELS 

^ 

K 

7.6 

BILLION    BARRELS 

> 

^v^6.7    BILLION    BARRELS 

o 

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H 

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UJ 

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> 

5.9    BILLION 

N 

BARRELS 

05 

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PRODU 

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..3.2    BILLION    BARRELS 


ESTIMATED    UNMINED 
SUPPLY ■ 1930 


1908       1910 


1920        1922        1924       1926        1928       1930 


Fig.  4. — Estimated  unmined  .supply  of  crude  petroleum  in  the  United  States. 
After  Pogue  and  Lubin,  U.  8.  Fuel  Administration;  data  for  1908-1920 
from  U.  S.  Geological  Survey;  projection  1920-1930  from  Bates  and  Lasky, 
Amer.  Inst.  Min.  and  Met.  Eng. 

Distribution  of  Unmined  Supply. — The  original  quantities  of  oil 
underground  in  the  various  producing  fields,  as  well  as  the  extent  to 
which  the  different  areas  have  been  exploited,  are  dissimilar,  and  it 
is  therefore  of  interest  to  review  the  distribution  of  the  remaining 
supply.     The  resource  situation  by  fields,  on  the  basis  of  the  esti- 

'  George  Otis  Smith,  A  Foreign  Oil  Supply  for  the  United  States,  Publ. 
No.  157,  American  Institute  of  Mining  and  Metallurgical  Engineers,  January, 
1920. 


DISTRIBUTION   OF  UNMINED   SUPPLY 


21 


mates  of  the  U.  S.  Geological  Survey,  is  accordingly  presented  in 
Table  8  and  interpreted  graphically  in  Fig.  5. 


Table  S.^ — The  Quantity  of  Petroleum  Extracted  and  Still  Available  in 
THE  Oil-fields  of  the  United  States 
(Data  from  the  U.  S.  Geological  Survey) 


Fields 

Original 

Supply 

(Millions 

of  Ban  els) 

Extracted  to 

Jan.  1,  1921 

(Millions 

of  Barrels) 

Per  Cent 
E.xhausted 

Available 
Jan.  1,  1921 

(Millions 
of  Barrels) 

1920 

Production 

(Millions 

of  Barrels) 

Appalachian 

Lima-Indiana.  .  .  . 

Illinois 

Kans.-Okla 

N.  Texas 

N .  Louisiana 

Gulf 

Wyoming 

California 

Others 

Total 

1,772 

488 

473 

2,716 

479 

191 
1,054 

440 
3,364 

361 

1281 
455 
321 

1251 
217 

138 

351 

70 

1321 

11 

72 
93 
68 
46 
45 

72 
33 
16 
39 
3 

491 

33 

152 

1465 

262 

53 

703 

370 

2043 

350 

30.5 

3.1 

10.8 

144.2 

71.0 

33.9 

26.8 

17.2 

105.7 

0.2 

11,338 

5416 

48 

5922 

443.4 

Interpretation  of  Supply. — It  must  not  be  supposed  that  the  un- 
mined  supply  can  be  divided  by  the  current  production  and  a  figure 
obtained  that  will  even  approximate  the  life  of  the  resource.  The 
estimates  were  originally  drawn  on  the  basis  of  the  present  factor  of 
recovery,  which,  as  will  appear  in  Chapter  28,  is  unduly  low,  and  upon 
the  present  price  level,  which  has  not  stimulated  the  utmost  extrac- 
tion of  the  oil.  With  increasing  dearth  and  rising  prices,  oil  not  now 
economically  recoverable  will  be  brought  to  the  surface,  the  supply 
of  oil  will  be  enlarged  by  more  efficient  methods  of  mining,  and  a 
relatively  smaller  volume  of  oil  will  be  made  to  perform  a  given 
service  through  more  effective  refining  and  application.  The  supply, 
therefore,  may  be  expected  to  spread  over  a  greater  period  of  time 
and  a  wider  range  of  essential  service  than  would  appear  iirom  an 
unqualified  consideration  of  the  figures  alone. 

What  the  estimates  of  the  unmined  supply  do  show,  therefore, 
is  not  impending  exhaustion,  but  the  imminence  of  a  period  of 
economic  and  technical  proficiencj'  in  bringing  the  remaining  supply 
of  our  crude  petroleum  into  effective  service.  The  arrival  of  this 
period  may  be  expected  to  usher  in  changes  of  far-reaching  signifi- 
cance in  the  structure  and  functioning  of  the  petroleum  industry. 


22 


THE   RESOURCE   SITUATION 


•  APPALACHIA'hi 


LIMA -INDIANA 
ILLINOIS 


KANSAS-  OKLAHOMA. 


N.  TEXAS 

N.    LOUISIANA 


Oil  in  Foreign  Countries. — The  limited  size  of  the  oil  reserve  of 
the  United  States,  and  the  degree  to  which  it  is  already  depleted, 
naturally  direct  attention  to  foreign  oil-fields.  The  petroleum 
resources  of  most  of  the  rest  of  the  world  are  far  less  thoroughly 
measured  than  those  of  this  country;    although  sufficient  is  known 

perhaps,  to  lead  to  an 
approximation  of  the 
world's  reserve,  if  lee- 
way be  allowed  as  a 
margin  of  error. 

There  is  little,  if 
any,  doubt  but  that 
the  dominant  portion 
of  the  oil  in  the  crust 
of  the  earth  underlies 
three  broad  areas :  the 
United  States;  the 
Caribbean  basin,  in- 
cluding Mexico,  Cen- 
tral America,  Colom- 
bia, and  Venezuela; 
and  the  Caspian- 
Black  -  Sea  -  Eastern 
Mediterranean  region, 
including  southern 
Russia,  south-western 
Siberia,  Mesopotamia, 
Persia,  and  Palestine. 
These  three  major  oil 
areas  have  an  original 
oil  content  that  for 
purposes  of  compari- 

FiG.  5.— The  petroleum  reserve  of  the  United  States  son  may  be  regarded 
by  fields,  showing  the  portion  used  to  Jan.  1,  1921;  as  of  the  same  order 
data  from  U.S.  Geological  Survey.  of   magnitude,    or 

roughly  10  billion  bar- 
rels each.  While  such  figures  are  doubtless  highly  speculative, 
they  are  better  than  purely  qualitative  terms  and  are  reasonably 
satisfactory  as  a  basis  of  discussion.  Elsewhere  in  the  world 
there  may  be  an  additional  10  billion  barrels,  thus  raising  the 
world  resource  to  the  neighborhood  of  40  billion  barrels  or  so, 
of  which  the  United  States  has  used  up  approximately  half  of  the 
10  billion  barrels  falling  immediately  to  her  share. 


CALIFORNIA 


OTHERS 


f — r 


1 — I 


O       lO    20  30   40    50    60     70    80    90  100<< 
FIGURES   REPRESENT   MILLIONS   OF  BARRELS 


OIL  IN   FOREIGN   COUNTRIES 


23 


The  general  distribution  and  magnitude  of  the  principal  petroleum 
reserves  of  the  world  have  been  estimated  by  Eugene  Stebinger, 
of  the  Foreign  Mineral  Section  of  the  U.  S.  Geological  Survey,  and 
the  results  of  these  estimates  have  been  published  and  discussed 
by  David  White.^  A  map  compiled  by  the  Survey  showing  these 
estimates  in  diagrammatic  form  is  presented  in  Fig.  6,  on  which  the 
estimated  reserves  are  shown  by  circles  proportional  to  the  quan- 
titative importance  of  the  various  regions.  The  data  upon  which 
this  map  is  based  are  shown  in  Table  9. 

Table  9. — Preliminary  Estimate  of  the   Petroleum  Resources  of  the 
World,  after  Stebinger  of  the  U.  S.  Geological  Survey 


Regions 


Relative 
Magnitude 


Approximate 
Quantity  in 
Millions  of 
Barrels 


United  States  and  Alaska 

Canada 

Mexico 

Northern  South  America  including  Peru 

Southern  South  America  including  Bolivia 

Algeria  and  Eg>'pt 

Persia  and  Mesopotamia 

S.  E.  Russia,  S.  W.  Siberia  and  the  region  of  the 

Caucasus 

Rumania,  Galicia  and  Western  Europe 

Northern  Russia  and  Saghalien 

Japan  and  Formosa 

China 

India 

East  Indies . 

Total 

Total  eastern  hemisphere 

Total  western  hemisphere 

Total  north  of  the  equator 

Total  south  of  the  equator 


100 
14 
65 

82 
51 
13 
83 


83 
16 
13 
18 
20 
14 
43 


7,000* 

995 
4,525 
5,730 
3,550 
925 
5,820 


5,830 
1,135 

925 
1,235 
1,375 

995 
3,015 


615 

303 

312 

520 

95 


43,055 

21,255 

21,800 

36,400 

6,655 


*  Since  this  table  was  ronipleted  the  reserve  in  the  United  States  has  been  drawn  upon 
to  the  extent  of  over  800  million  barrels,  thus  being  reduced  to  about  0000  million  barrels 
as  of  Jan.  1,  1921. 

It  should  be  noted  that  the  totals  given  in  the  table  "  suggest  a 
surprisingly  even  balanced  distribution  of  oil  between  the  eastern 

1  The  Petroleum  Resources  of  the  World,  Annals  of  the  American  Academy, 
May,  1920. 


24 


THE   RESOURCE   SITUATION 


OIL   IN   FOREIGN   COUNTRIES 


25 


-.Mexico:-'-' 


N  SOUTH 
AMERICA 
(InM.  PERU) 


•/.-/     -I  ;l    -/■>/■ 

'^-S.SpUTJH^,-/ 

-,  America": 
-'oJicCb.olivIa).' 


xvwvvvw 

SLGERIA  S  EGYP.. 

>wvwwvvv 


.P.ERSIA.;8i-.' 
MESOPOTAivilA 


^S.E.    RUSSIA^ 
S.W.    SIBERIA; 

Sc  Caucasus; 

1 


ROUMANIA.GALICIA 
X  W'.  EUROPE 


■JAPAN    & 
■.F.ORMOSA 


\x^^\s 


''western,  N 


HEMISPHERE 


V^.V^     V        »    ^\X\   X 


\\\\\\x 


v''''nvSx\\N\\^\'>' 
XV\V\N\\\VSVV^ 


■   ^^\^^^^-^^^^" 

\\X^vS\\\'^^'^\V\ 
^xXxx'^^X^Sx^NXSV 

;;xSb;uT''h(xO(\\~ 

^\^EQU>Td,R^xV 

ill 


Fig.  7. — Relative  petroleum  resources  of  the  world,  after  data  compiled  by 
Stebinger,  U.  S.  Geological  Survey. 


26  THE   RESOURCE   SITUATION 

and  western  hemispheres,  and,  as  with  the  distribution  of  the  world's 
coal  reserve,  a  great  preponderance  of  tonnage  north  of  the  equator." 
In  discussing  these  estimates.  White  calls  them  conservative  not 
only  because  they  represent  "the  cautious  judgment  of  a  well-trained 
and  experienced  oil  and  gas  geologist  based  on  the  best  infonna- 
tion  available  at  the  present  time,  but  also  for  the  reason  that  the 
value  assigned  to  the  oil-fields  of  the  United  States  is  conservative." 
White  goes  on  to  say  that  "  these  forecasts,  or  geological  guesses, 
formulated  conservatively  with  the  probability  that  deficiencies  will 
be  very  much  more  than  compensated  by  excesses,  lead  one  to  con- 
clude that  there  are  probably  20  billion  barrels  of  oil  available  in  the 
world  in  addition  to  the  43  billion  barrels  contained  in  the  regions 
covered  by  Mr.  Stcbinger's  estimates  quoted  above,  or  as  much  in 
round  numbers,  as  60  billions  of  barrels  in  all." 

The  figures  shown  in  Table  9  are  graphically  expressed  in  Fig.  7, 
which  throws  the  estimates  into  perspective. 

Undoubtedly  the  estimates  of  the  world's  reserve  as  here  given 
are  the  most  general  approximations  merely,  but  at  the  least  they 
have  sufficient  substance  to  show  where  the  leading  centers  of  oil 
production  are  likely  to  be  in  the  future ;  and  they  serve  to  emphasize 
the  important  draft  already  made  upon  the  portion  underlying  the 
United  States.  With  due  qualification  they  must  be  given  consider- 
ation in  matters  involving  the  industrial  and  international  policy  of 
this  country. 


CHAPTER  III 
THE  TREND  OF  OIL-FIELD  DEVELOPMENT 

The  exploitation  of  petroleum  involves  three  successive  stages: 
exploration,  to  locate  oil-bearing  territoiy;  development,  to  bring 
the  oil  into  production;  and  production,  to  reduce  the  oil  to  pos- 
session. A  sustained  output  of  petroleum  necessitates  vigorous 
extension  of  productive  territory,  consistent  drilling  of  the  area  so 
proven,  and  steady  withdrawal  of  the  oil  brought  into  production. 
The  first  two  factors  are  progressive,  while  the  third  is  cumulative. 
At  any  given  moment,  the  country's  output  of  crude  petroleum  is  a 
function  of  the  number  of  producing  wells  and  their  average  flow; 
but  the  course  of  production  is  dependent  in  addition  upon  the  rate 
of  drilling  and  the  extension  of  territoiy  suitable  for  drilling,  since 
the  average  flow  of  old  wells  is  a  decreasing  function. 

Exploration,  or  the  extension  of  oil-bearing  territoiy,  is  highly 
individualistic  and  is  prosecuted  mainly  by  an  activity  picturesquely 
termed  '' wildcatting,"  whereby  wells  are  drilled  in  regions  of  promise 
by  individuals,  corresponding  somewhat  to  the  prospectors  in  metal- 
mining,  who  are  spurred  on  by  the  notable  gain  attaching  to  lucky 
strikes.  To  a  large  degree,  therefore,  the  pioneer  work  of  exploration 
falls  to  the  lot  of  individual  initiative  and  enterprise,  the  organized 
agencies  of  production  tending  to  center  their  attention  upon  the 
acquisition  and  drilling  of  land  in  proven  territoiy.  The  cost  of 
exploration,  especially  that  of  negative  exploration,  does  not  fall 
heavily  upon  the  books  of  the  industry  proper,  being  carried  chiefly 
at  the  expense  of  the  speculative  fringe  of  operators  playing  a  hazard- 
ous game  of  chance.  There  is  no  basis  for  estimating  the  cost  of 
exploration  in  the  aggregate,  as  it  does  not  enter  completely  as  a 
tangible  factor  into  the  cost  sheets  of  productive  wells  . 

Development,  or  the  drilling  of  proven  territory,  is  the  factor  of 
prime  importance  in  compensating  for  the  normal  declining  tendency 
of  producing  wells.  The  degree  to  which  the  countiy's  production 
of  crude  petroleum  is  dependent  upon  the  new  wells  drilled  is  indicated 
by  figures  compiled  by  the  American  Petroleum  Institute  which 
show  that  the  output  of  twenty  largo  prodiicing  companies  in  1919 
was  172  million  barrels,  of  which  45  million,  or  26  per  cent,  came  from 

27 


28 


THE    TREND    OF    OIL-FIELD    DEVELOPMENT 


wells  completed  in  that  year.  It  would  appear  from  these  figures 
that  roughly  three-quarters  of  our  annual  production  of  oil  is  now  com- 
ing from  old  wells,  and  one-quarter  from  new  wells. 

Technology  of  Oil-field  Development. — The  technical  features 
of  drilling  and  production  are  complex  and  need  be  touched  on 
here  only  in  so  far  as  they  bear  upon  the  economic  problems.  Oil, 
of  course,  is  won  from  wells  drilled  vertically  into  the  crust  of  the 
earth  to  a  depth  of  usually  from  one  thousand  to  several  thousand 
feet  until  the  productive  stratum  is  tapped.  Two  methods  of  drilling 
are  in  vogue:  the  older,  and  more  widely  employed,  is  the  standard 
method,  which  utilizes  a  churn  drill  that  pounds  its  way  downward; 
the  newer  and  more  efficient  in  formations  that  are  not  too  resistant 
is  the  rotaiy  method,  employing  a  drill  that  bores  its  way  downward. 
The  drill  hole  must  usually  be  protected,  either  in  whole  or  in  part, 
by  the  insertion  of  iron  piping  called  casing,  which  prevents  the  inflow 
of  water  or  the  improper  escape  of  the  oil  and  associated  gas. 

The  completion  of  an  oil  well  is  a  costly  process  running  usually 
into  tens  of  thousands  of  dollars,  as  it  involves  a  large  expenditure  of 
labor,  power,  steel,  and  time  as  well  as  a  considerable  outlay  of  capital. 
In  1913  the  average  2500-foot  well  in  Oklahoma  or  Kansas  could  be 
drilled  and  equipped  for  $12,000;  in  1920  a  similar  well  cost  $32,000. 
In  Table  10  is  shown  an  analysis  of  the  items  of  cost  entering  into  the 
drilling  of  a  typical  oil  well  2500  feet  in  depth  under  average  condi- 
tions with  cable  tools  in  the  Mid-Continent  field. 


Tahle  10. — ^CosT  OF  Drilling  and  Equipping  a  Typical  2.500-foot  Well  in 
THE  Mid-Continent  Field,  1913-1920 

(Data  from  Bates  and  Lasky,  compiled  by  F.  W.  Swift) 

{In  thousands  of  dollars) 


I  terns 

1913 

1914 

1915 

1916 

1917 

1918 

1919 

1920  * 

Casing 

Contract  drilling .  . 
Labor  

5.03 
2.03 
1.22 
3.52 

4.87 
3.38 
1.32 
3.74 

4.82 
3.65 
1.35 
3.74 

6.55 
4.38 
1.45 
4.27 

9.26 
5.00 
1.77 
5.42 

10.3 
5.63 
2.10 
6.. 53 

13.0 

7.75 
2.83 
7.92 

13.0 

7.75 
3.40 

7.85 

Other 

Total 

11. 8t 

13.3 

13.6 

16.6 

21.4 

24.6 

31.5 

32.0 

*  Estimated. 


t  Corrected  total. 


The  cost  of  drilling,  also,  increases  rapidl}^  with  depth;  roughly 
speaking  each  thousand  feet  below  a  depth  of  three  thousand  doubling 
the  cost  of  the  well.  This  factor  of  accelerating  cost  with  depth 
has  far-reaching  significance  in  connection  with  future  development 


COST   OF   PRODUCTION  29 

work  as  shallower  deposits  become  progressively  exhausted;  it  also 
represents  a  factor  limiting  the  depths  to  which  deposits  may  be 
commercially  exploited. 

Once  the  oil  is  reached,  there  are  many  natural  and  artificial 
factors  entering  into  the  rate  of  production  such  as  the  pressure  under 
which  the  oil  occurs,  its  viscosity,  the  thickness  and  extent  of  the 
reservoir  rock,  the  porosity  and  structure  of  the  reservoir  rock,  the 
depth  of  the  well,  the  distance  from  other  wells,  the  condition  of  the 
equipment,  the  degree  of  competition,  the  price  of  oil,  and  many 
others.^  In  general,  wells  show  an  initial  production  which  rapidly 
declines  to  a  settled  production  which  in  turn  gradually  tapers  off  to 
an  ultimate  output  so  low  that  the  well  is  abandoned.  New  wells 
are  customarily  reported  in  terms  of  their  initial  daily  production, 
and  this  figure  must  be  duly  discounted  in  estimating  the  future 
output  of  the  well.  For  instance,  the  average  well  in  many  i)arts 
of  Oklahoma  will  produce  daily  during  the  first  year  of  its  life  about 
25  per  cent  of  its  initial  daily  production.  Wells  in  some  localities 
show  an  initial  daily  production  running  up  to  thousands  of  barrels, 
but  the  average  initial  daity  production  in  the  older  fields  is  much 
less.  Thus  in  1918,  the  average  initial  production  in  the  Appalachian 
field  was  16.2  barrels;  in  the  IlUnois  field,  21.1  barrels;  in  the  Mid- 
Continent  field,  100.6  barrels;  and  in  the  Gulf  field  331.9  barrels. 
During  the  same  year  the  average  daily  production  of  all  wells  was 
4.7  barrels. 

Cost  of  Production.— The  cost  of  producing  a  barrel  of  oil  is  an 
important  figure  which  unfortunately  is  not  precisely  known  in  many, 
if  not  the  majority  of,  field  operations.  The  price  of  crude  petro- 
leum does  not  bear  the  same  degree  of  systematic  relationship  to  the 
cost  of  production  as  is  the  case  with  ordinary  commodities;  the 
price  of  crude  petrolemn  fluctuates  independently  of  cost  and  may 
fall  below  the  latter  in  times  of  overproduction.  The  unit  produc- 
tion cost  for  a  representative  company  operating  in  the  Mid-Continent 
field,  with  a  daily  production  of  over  2000  barrels,  was  2  dollars  per 
barrel  in  1919.  This  company  realized  2  dollars  and  40  cents  a 
barrel  on  its  sales,  thus  making  a  net  profit  of  40  cents  a  barrel.  The 
operating  costs  of  this  company  are  given  in  Table  11. 

The  high  proportion  of  the  total  cost  that  is  credited  against 
indirect  and  non-tangible  elements  such  as  depletion,  dry  holes,  etc., 
is  worthy  of  special  note.  In  many  operations  the  cost  is  incorrectly 
calculated  through  omission  of  these  items  and  false  book  profits  are 
shown. 

•  Ralph  Arnold,  The  Petroleum  Resources  of  the  United  States,  Eeonomic 
Geology,  vol.  10,  1915. 


30 


THE    TREND    OF   OIL-FIELD    DEVELOPMENT 


Table   11. 


-Analysis   of  Operating   Costs   in    1919  of  a  Representative 
Producing  Company  in  the  Mid-Continent  Field 

(Data  from  Bates  and  Lasky) 


Direct  lifting  expense 

Depletion  of  property 

Depreciation  of  physical  equipment 
Xon-tangible  development  expense. 

Dry  holes  and  abandonments 

General  expense 

Year's  proportion  of  bonus 

Rentals  of  undeveloped  acreage .  .  . 

Total 


22.50 

per  cent 

18.50 

1  (      ( ( 

15.60 

i  I      1  ( 

14,55 

( (      11 

13.20 

<  (      11 

6.40 

i  I      I  i 

5.13 

it      11 

4  12 

It      <  ( 

100.00 

per  cent 

The  most  important  direct  cost  in  producing  oil  is  the  Ufting 
expense.  The  cost  of  Ufting  a  barrel  of  oil  for  a  representative  com- 
pany in  the  Mid-Continent  field  during  an  average  month  of  1920 
was  G3  cents.  This  figure  is  fairly  representative  of  the  field  as  a 
whole.  An  analysis  of  the  components  of  this  item  of  cost  is  given  in 
Table  12. 

Table  12. — Analysis  of  the  Unit  Lifting  Cost  of  a  Representative  Pro- 
ducing Company  in  the  Mid-Continent  Field  for  an  Average  Month 
IN  1920. 

(Data  from  Bates  and  Lasl»y) 


Items 

Cents  per  Barrel 

Per  Cent  of  Total 

Labor 

Overhead 

17.8 
15,6 
13,2 

8.8 
6.5 
1.1 

28.25 
24.75 
20.98 

13.96 

10  31 

1.75 

Repairs 

Teaming 

Supplies 

Cleaning 

Total 

63.0 

100.00 

According  to  figures  compiled  by  the  Federal  Trade  Commission  ^ 
covering  the  majority  of  wells  in  California,  the  average  cost  of 
producing  a  barrel  of  oil  was  27.4  cents  in  1914,  and  46.3  cents  in 
1919,  an  increase  of  69  per  cent.     The  component  of  the  total  cost 

^  Summary  of  report  on  the  Pacific  Coast  Petroleum  Industry,  Washington, 
April  7,  1921. 


THE   COMPETITOR   FACTOR   IN   PRODUCTION 


31 


falling  under  the  head  of  lifting  expense,  including  all  expense 
incurred  in  raising  the  crude  petroleum  from  the  well  and  deUver- 
ing  it  into  the  producer's  storage  tanks,  varies  widely.  In  the 
case  of  flowing  wells  this  expense  ran  as  low  as  1  cent  per  barrel  with 
one  company  in  1914;  while  for  very  deep  wells  requiring  pumping 
this  item  amounted  to  as  much  as  72  cents  as  shown  by  the  records 
of  another  company  for  1914.  The  cost  of  production  in  California, 
as  elsewhere,  shows  a  consistent  relationship  to  the  size  of  the  opera- 
tions, as  indicated  in  Table  13. 


Table  13. — Cost  of  Producing  a  Barrel  op  Oil  in  California  in  1914  and 
1919,  BY  Sizes  of  Companies 

(Data  from  Federal  Trade  Commission) 


Size  of  Company  in  Barrels  of  Annual 
Production 

Cost  of  Production  in  Cents  per 
Barrel 

1914 

1919 

1,000,000-250.000 

28.6 

49.3 
72.1 

49.9 

74.9 

121.2 

250  000-  50  000                

Under          50  000            

Average  of  all 

27.4 

46.3 

The   Competitive   Factor 


in  Production. — In  the  drUhng  and 
production  of  oil  there  is  a  unique 
competitive  factor  at  work  character- 
istic of  no  other  substance,  which  has 
a  far-reaching  effect  upon  the  econo- 
mic behavior  of  petroleum  and  serves 
to  explain  its  economic  peculiarities. 
This  factor  arises  from  the  competi- 
tive extraction  of  a  liquid  from  a 
common  reservoir,  as  exemplified  in 
the  conditions  prevailing  in  the  aver- 
age oil-pool.  Fig.  8,  for  example, 
represents  640  acres  of  oil  land,  where 
16  companies  own  40  acres  each. 
This  is  by  no  means  an  exaggerated 
conception,  since  properties  of  10 
acres  or  even  less  are  not  uncommon. 
When  A  drills  a  well  in  the  south- 
eastern corner  of  his  lot,  B,  E,  and  F,  must  drill  offset  wells  or  suffer 


Fig.  8. — Hypothetical  square  mile 
of  oil-bearing  territory,  showing 
checkerboard  disposition  of  small 
property  holdings — the  funda- 
mental cause  of  overproduction 
and  waste. (Adapted  from  Requa.) 


32  THE    TREND    OF    OIL-FIELD    DEVELOPMENT 

their  property  to  be  drained.  For  every  corner  well  so  drilled,  three 
other  corner  wells  must  be  put  down;  and  for  every  line  well,  an 
offset  line  well  must  be  drilled  as  pi-otection.  In  tune  of  over- 
production, operator  F  cannot  afford  to  shut  down,  because  A,  B, 
C,  G,  E,  I,  J,  or  K,  or  any  combination  of  them,  may  refuse  to  do 
likewise,  and  oil  in  the  ground  of  F  wall  be  extracted  from  his  prop- 
erty. Because  of  this  condition,  curtaihnent  in  output  in  practice 
comes  only  as  a  result  of  a  natural  decline  in  the  flow  of  producing 
wells.  "  The  small  producer,  no  matter  what  happens,  is  between 
the  upper  and  nether  millstones.  He  is  powerless  to  control  his 
own  or  his  neighbor's  production.  .  .  .  "  ^ 

The  small  property,  overlying  the  oil-bearing  reservoir  in  numbers 
and  forming  a  checkerboard  pattern,  is  prevalent  in  all  the  producing 
fields.  Fig.  9  represents  a  typical  portion  of  the  Gushing  pool  in 
Oklahoma,  from  a  map  pubhshed  by  the  U.  S.  Geological  Survey; 
the  concentration  of  wells  along  the  property  lines  is  striking.  The 
conditions  outlined  in  the  preceding  paragraph  as  characteristic  of  a 
hypothetical  square  mile  of  territory  pervade  the  whole  production  of 
petroleum.  Gompetition  bctw^een  small  holdings  is  inevitable  and 
leads  to  the  same  results  in  the  mass  as  it  does  in  the  simple  group  of 
properties.  In  the  words  of  Max  W.  Ball,^  "  Ignorance  there  may  be, 
carelessness  there  undoubtedly  is,  but  back  of  ignorance,  of  care- 
lessness, of  reckless,  headlong  methods,  is  the  real  cause — the  fact 
that  the  average  holding  is  so  small  that  speed  is  the  owner's  sole 
protection.  Let  him  be  careful  if  he  can;  let  him  be  economical  if  he 
can  find  a  way;  but  careful  or  careless,  reckless  or  conservative,  he 
must  be  speedy  if  he  would  survive.    The  small  holding  is  his  master." 

The  development  and  production  of  petroleum,  therefore,  are 
dominated  by  a  factor  which  arises  from  a  reaction  between  human 
nature  and  the  geological  occurrence  of  petroleum  and  has  a  sig- 
nificance and  importance  difficult  to  exaggerate.  This  factor  must 
be  held  in  mind  in  viewing  any  phase  of  the  oil  industrj^;  the  eco- 
nomic aspects  of  petroleum  cannot  be  appraised  without  its  proper 
evaluation.  Its  effect  has  been  to  drive  the  production  of  petroleum 
forward  insistently  and  without  respite,  and  to  render  petroleum 
pecuUarly  resistent  to  retardation  in  periods  of  overproduction 
and  times  of  reduced  demand.  It  has  contributed  to  making  the 
United  States  the  greatest  producer  of  oil  in  the  world,  but  it  has 
assisted  in  reducing  her  reserve  of  oil  by  half.     It  has  helped  to 

1  M.  L.  Requa,  Petroleum  Resources  of  the  LTnited  States,  Senate  Document 
363,  64th  Congress,  1st  session,  1916,  p.  16. 

''Adequate  Acreage  and  Oil  Conservation,  Proc.  Am.  Min.  Cong.,  Nov., 
1916,  pp.  322-333. 


THE  COMPETITIVE  FACTOR  IN  PRODUCTION 


33 


sustain  the  phenomenal  growth  of  automotive  transportation  bj^ 
providing   the   basis    of   motor-fuel   in    ever-increasing   quantities; 


LEGEND 

o-Rig 

•  -  Drilling  vffiU 
■♦•  -  Dry  hole 

•  -  Cil  wall 

•  -  Gas  well 

■♦■—  Abandoned  oU  well 
•♦•T-Abandoned  gas  well 

Fig.  9. — Map  of  a  portion  of  the  Cvishing  oil  pool,  Oklahoma,  showing  the  sub- 
division of  the  area  into  small  properties  and  the  resulting  grouping  of  walls 
along  the  property  lines.     (After  Beal,  U.  S.  Geological  Survey.) 

but  it  has  hidden  the  necessity  for  the  automotive  engine  to  evolve 
to  higher  levels  of  thermal  efficiency  and  to  lessened  dependence 


34 


THE    TREND   OF   OII^FIELD    DEVELOPMENT 


upon  volatility  in  fuel.  It  has  stimulated  wide  fields  of  application 
and  supported  important  lines  of  industrial  development;  but  it 
has  created  imminent  problems  in  readjustment  and  reconstruction. 
Whether  for  better  or  worse,  the  effect  of  the  competitive  small 
holding  in  oil-field  development  has  been  extensive  and  profound. 

Bearing  of  Geology  upon  Oil-field  Development. — During  the 
past  fifteen  years  the  science  of  geolog}^  has  been  applied  in  growing 
degree  to  the  location  of  the  structures  underlain  by  oil  and  to  th,e 
measurement  of  underground  conditions  as  a  guide  to  exploitation. 

"  One  need  look  back  only  a  few 
j'ears — a  very  few  years — to  a  time 
when  oil  men  would  have  laughed 
with  scorn  at  the  statement  that 
there  was  any  connection  what- 
ever between  geology  and  the  oil 
industry.  To-day  every  impor- 
tant company  in  the  world  has  its 
corps  of  oil  geologists,  and  upon 
their  opinion  depends  the  invest- 
ment of  most  of  the  millions  of 
dollars  which  annually  go  into 
prospecting  and  development 
work."  1 

It  is  difficult  to  appraise  close- 
ly the  effect  of  geologj^  upon  the 
development  of  the  petroleum 
resource.  Wherever  used,  it  has 
greatly  increased  the  productivity 
of  the  drill  and  led  to  a  fuller 
control  of  the  natural  extractive 
forces  asw^ell  asalleviatedthe  harm- 
ful effects  of  water,  though  se- 
riously handicapped  in  the  latter 
respects  by  economic  forces  aris- 
ing from  the  small  holding  which 
worked  at  cross  purposes  with  it.  The  widespread  employment  of 
geology  has  also  apparently  speeded  up  the  rate  of  production  as  well 
as  reduced  its  unit  cost.  Another  important  service  rendered  by 
geology  in  the  oil-fields  has  been  in  the  direction  of  measuring  the 
unmined  supply,  with  results  by  which  both  industrial  and  national 
policy  will  be  guided  in  growing  degree  in  the  future. 

1  Ralph  Arnold,  Oil  Geology  in  Relation  to  \aluation  Work,  Bull.  Geol.  Soc. 
America,  vol.  31,  1920,  pp.  433-440. 


1913   1914 


Fig.  10. — Oil  acreage  in  the  United 
States  by  years,  1913-1918;  data 
from  U.  S.  Geological  Survey. 


PRODUCING  OIL-WELLS 


35 


Table  14. — Oil  Acreage  in  the  United  States 

(Data  from  the  U.  S.  Geological  Survey) 

{III  thousands  of  acres) 


Fee 

Lease 

Ratio  of  Fee 
to  Lease 

Total 

1913 
1914 
1915 
1916 
1917 
1918 

1051 
1445 

988 
1169 
1019 
1394 

7,088 
8,342 
9,014 
8,025 
11,436 
13,036 

14.8 
17.3 
11.0 
14.6 
8.9 
10.7 

8,139 

9,787 
10,002 

9,195 
12,455 
14,430 

Table  15. — Producing  Oil-wells  in  the  LTnited  States,  October  31,  1920 
(Data  from  U.  S.  Geological  Survej') 


Producing 

Oil-wells 

(Thousands  of  Wells) 

Average  Daily 

Production  per  Well 

(Barrels) 

Pennsylvania 

Oklahoma 

Northwestern  Ohio 

67.7 
50.7 
21.1 
19.5 
18.5 

16.8 
15.7 
14.0 
9.49 
9.40 

7.80 
2.56 
2.40 
1.70 
1.00 

0.14 
0.07 

0.3 
6.0 
0.3 
1.1 

0.8 

1.7 

6.7 

0.2 

32.3 

22.9 

3.1 
31.6 

1.1 
49.7 
55.9 

34.6 
4.1 

West  Virginia 

Central  and  Eastern  Ohio 

Illinois 

Kansas 

New  York 

California 

Central  and  Northern  Texas. 

Kentucky 

Northern  Louisiana 

Indiana 

Coast  Texas 

Wyoming  and  Montana 

Coast  Louisiana 

Colorado 

Country 

258 . 60 

4.9 

36 


THE    TREND    OF    OIL-FIELD    DEVELOPMENT 


OKLA 
50  7 


Oil  Acreage. — The  acreage  in  the  United  States  reported  by  the 

U.  S.  Geological  Survey  as  oil-bearing  is  shown  by  years  from  1913- 

1918  in  Table  14  and  Fig.  10.     Most  of  the  oil  acreage  is  operated  on  a 

royalty  basis,  only  10.7  per  cent  of  the  total  being  held  in  fee  in  1918. 

The  total  acreage  classed  as  oil-bearing  in  1918 

amounted  to  14  million  acres,  or  approximately 

22,500  square  miles — 0.74  per  cent  of  the  area 

of  the  United  States  exclusive  of  Alaska. 

Producing  Oil-wells.— On  October  31,  1920, 
there  were  approximately  258,600  producing 
oil-wells  in  the  United  States,  with  an  average 
daily  production  of  4.9  barrels  per  well.  The 
number  and  average  size  of  the  wells  in  the 
various  fields  are  shown  in  Table  15,  where 
conditions  may  be  seen  to  range  from  14,040 
wells  in  New  York  averaging  0.2  barrel  daily 
to  1000  wells  in  Wyoming  and  Montana  averag- 
ing 55.9  barrels  daily.  (See  also  Fig.  11.)  In 
general,  the  older  fields  have  great  numbers  of 
small  wells,  while  the  newer  fields  are  charac- 
terized by  fewer  wells  of  greater  flow;  there 
is  a  relationship  also  between  productivity  per 
well  and  the  price  of  crude  petroleum,  since 
small  wells  must  be  pumped  at  added  produc- 
tion costs.  Thus  in  periods  of  rising  prices 
many  small  wells,  especially  in  the  older  fields, 
are  brought  into  play,  only  to  relapse  into 
inaction  when  prices  fall  below  their  respective 
economic  limits. 

The    distribution    of    producing    wells    on 
January  1,  1919,  more  recent  data  in  sufficient 
detail  being  unavailable,  is  shown  on  a   map 
of  the  United   States  in  Fig.   12.     The  relative 
Fig.   11.— Number  of  density  of  wells  in  the  Appalachian  field   points 
producing  oil  wells  ^^  ^^le  intensity  of  exploitation  in  this  region, 
in  the  United  States  mi        i  •     -i  i  r  i      •  -i 

1  he  change  m  the  number  oi  producmg  oil- 


I 


N    V/    OHIO 
21  1 


T 


m 


-•.••ICLINOIS; 


KANSAS 
15.7 


CALIF. 
9.46 


^ALL    OTHERS 
15.7 


FIGURES   ARE 
THOUSANDS  OF   WELLS 


on  Oct.  31,  1920,  by 
fields;  data  from  U. 
S.GeologicalSurvey. 


wells  in  various  states  for  the  period  from  1913 
to  1920  is  shown  in  Table  16.  It  is  apparent 
that   in  most  states   the  number  of  producing 

wells  is  being  augmented,  which  means  that  new  wells  are  drilled  in 

greater  number  than  old  wells  become  extinct. 

New  Wells  Completed. — The  number  of  new  wells  completed  in 

the  various  fields  in  each  year  from  1913-1920  is  shown  in  Table  17, 


PRODUCING   OIL-WELLS 


37 


38 


THE    TREND    OF   OIL-FIELD    DEVELOPMENT 


Table  16. — Producing  Oil-wells  ix  the  United  States,    1913-1920,   by 

States 

fData  from  U.  S.  Geological  Survey) 

(In  thousands  of  welh) 


1913* 

1914* 

1915* 

1916* 

1917* 

1918* 

1920t 

California 

6.82 

7.13 

7.31 

7.78 

8.36 

8.97 

9.49 

Colorado 

0.09 

0.09 

0.09 

0.09 

0.09 

0.10 

0.07 

Illinois 

14  1 

14.8 

15.2 

15.8 

16.1 

16.0 

16.8 

Indiana 

3.81 
3.05 

3.40 
3.41 

2.90 
3.67 

2.53 

5.84 

1.94 

7.51 

1.80 

8. 68 

2.40 
15.7 

Kansas 

Kentucky 

0.97 

1.03 

1.06 

1.86 

2.89 

3.62 

7.80 

Louisiana 

0  99 

1.18 

1.54 

1.73- 

1.89 

2.19 

2.70 

New  York 

10  7 

11  1 

11.0 

11.2 

11.4 

11.4 

14.0 

Ohio 

31.2 

31.8 

30.8 

30.8 

30.0 

30.0 

40.0 

Oklahoma 

24  1 

27.8 

29.1 

31.7 

35.1 

37.7 

50.7 

Pennsj'lvania .  .  .  . 

55.3 

58.3 

58.4 

58.4 

58.9 

58.9 

67.7 

Texas 

3.54 

3.85 

4.33 

5.19 

6.02 

7.13 

11.1 

West,  ^'irginia.  .  .  . 

14.5 

14.9 

15.3 

15.9 

16.2 

16.4 

19.5 

Wyo.  and  Mont.  . 
Total 

0.20 

0.26 

0.32 

0.42 

0.72 

0.94 

1.00 

169 

179 

181 

189 

197 

203 

259 

*  December  31. 


t  October  31. 


Table  17. — Wells  Completed  in  the  United  States  by  Fields,  1913-1920 
(Data  compiled  chiefly  from  Oil  and  Gas  Journal) 


1913 

1914 

1915 

191G 

1917 

1918 

1919 

1920 

Eastern..  . 

7,905 

5,909 

4,085 

6,234 

5,435 

4,413 

5,192 

5,682 

Lima-Ind. 

1,605 

452 

966 

800 

693 

824 

1,057 

C.Ohio... 

768 

952 

469 

582 

605 

940 

1,242 

Illinois.  .  . 

1,583 

756 

1,459 

647 

397 

370 

385 

Ky.-Tenn. 

179 

104 

1,091 

1,651 

2,190 

3,734 

2,888 

Kansas.  .  . 

2,174 

2,362 

1.088 

3,637 

3,469 

4,671 

3,442 

3,163 

Oklahoma 

9,131 

8,297 

4,603 

7,730 

6,717 

8,374 

8,196 

9,187 

N.Texas.. 

761 

755 

295 

576 

1,020 

1,225 

3,564 

6,479 

N.  La.... 

541 

448 

476 

546 

472 

533 

724 

1,163 

Gulf 

731 

564 

859 

1,113 

1,562 

1,677 

1,238 

1,760 

Wyoming . 

74 

134 

277 

248 

286 

348 

California. 
Total  U.  S. 

575 

421 

240 

645 

736 

589 

559 

587 

25,582 

22,891 

13,984 

24,620 

23,091 

25,615 

29,069 

34,021 

NEW   WELLS  COMPLETED 


39 


50,000 


100 


1914 


1915 


1916 


1917 


1918 


1919 


1920 


1921 


Fig.  13. — Wells  completed  annually  in  the  United  States  by  fields,  1913-1920. 
JData  from  Oil  and  Gas  Journal. 


40 


THE    TREND   OF   OIL-FIELD    DEVELOPMENT 


while  the  data  are  plotted  on  a  ratio  chart  ^  in  Fig.  13  in  order  to  in- 
terpret the  trend  of  this  development  work.  The  notable  decline  in 
drilling  that  characterized  1915  in  response  to  the  1914-1915  period 
of  overproduction  in  the  Mid-Continent  field  is  suggestive  of  the 
probable  course  of  drilling  in  1921,  following  the  1920  period  of  over- 
production. The  marked  increase  in  drilling  activity  in  northern 
Texas  and  northern  Louisiana  during  1919-1920  in  particular  forms 
a  conspicuous  feature  of  the  chart. 

Not  all  wells  drilled  strike  oil,  and  the  numerical  relation  between 
new  oil-wells  and  dry  holes  over  a  period  of  years  is  shown  in  Table  18 
and  Fig.  14  for  the  great  Mid-Continent  field.    In  this  region,  about  a 


100- 
90- 
80- 
70- 
60- 

so- 

40- 
30- 
20- 
10- 
0- 

FlG 


KANSAS 


OKLAHOMA  N.TEXAS 


N.LOUISIANA 


1912  1914  19' 0  1918  1920  1912  1914  1916  1918  1970  1912  1914  1916  1918  1920  1912  1914  1916  1918  1920 


14. — Ratio  of  dry  holes  to  total  wells  drilled  in  the  Mid-Continent  field  by 
years,  1912-1920.  After  data  compiled  from  Oil  and  Gas  Journal  by  Bates 
and  Laskv. 


quarter  of  the  drilling  is  usualh^  non-productive.  No  distinct  trend 
is  revealed  by  the  data  as  to  whether  drilhng  in  the  aggregate  is 
becoming  more  successful  by  virtue  of  the  widespread  application 
of  geological  science,  but  presumably  this  latter  factor  is  tending  to 
offset  the  growing  difficulty  of  locating  productive  formations  as  the 
unknown  portion  of  the  reserve  is  progressively  diminished  in  size. 

Relation  between  Producing  Wells  and  New  Wells  Completed. — 
For  the  period  1910-1920,  the  ratio  of  new  wells  to  total  producing 

1  The  ratio,  or  semi-logarithmic  chart,  is  used  frequently  in  this  book  because 
of  its  value  in  analyzing  and  interpreting  economic  data.  By  virtue  of  the 
scale,  the  slopes  of  the  curves  are  proportional  to  the  percentage  changes,  and 
comparisons  between  separate  curves  on  the  same  chart  may  accurately  be 
made.  For  a  detailed  description  of  the  ratio  chart  consult  Irv'ing  Fisher, 
The  "Ratio"  Chart  for  Plotting  Statistics;  and  J.  A.  Field,  Some  Advantages 
of  the  Logarithmic  .Scale  in  Statistical  Diagrams,  .Journal  of  Political  Economy, 
vol.  25,  1917,  pp.  805-841. 


NEW  WELLS  COMPLETED 


41 


Table  18. — Wells  Drilled  in  Mid-Contixent  Field,  by  States,  1912-1920^ 


Wells  Drilled 

Percentage 
Dry 

Wells 

Initial  Production 

Oil 

Dry 

Gas 

Total 

Total     Average 
Barrels    per  Well 

Kansas: 

1912 

1913 

1914 

1915 

1916 

1917 

1918 

1919 

1920 

536 
1422 
1753 

610 
3142 
2712 
3463 
2638 
2327 

160 
260 

270 
147 
370 
538 
935 
630 
690 

253 
334 
317 
331 
112 
177 
273 
174 
147 

949 
2016 
2340 
1088 
3624 
3427 
4671 
3442 
3164 

16.8 
12.9 
11.5 
24.1 
10.2 
15.7 
20.0 
18.3 
26.4 

7,245 

22,467 

18,932 

11,319 

248,846 

319,093 

342,853 

172,479 

181,845 

13.5 
15.8 
10.8 
18.6 
79.2 
117.6 
99.0 
65.0 
78.0 

Oklahoma : 

1912 

1913 

1914 

1915 

1916 

1917 

1918 

1919 

1920 

4712 
6965 
6410 
3397 
6086 
5027 
5529 
5203 
6303 

843 
1308 
1343 

885 
1120 
1360 
2071 
2278 
2036 

438 
578 
539 
342 
377 
410 
754 
715 
758 

5993 
8851 
8292 
4624 
7583 
6797 
8354 
8196 
9097 

14.1 
15.3 
16.2 
19.1 
14.8 
20.0 
24.8 
27.8 
30.8 

228,886 
334,050 
976,244 
1,036,170 
521,895 
365,314 
372,558 
487,939 
773,900 

48.6 

48.0 

152.3 

305.0 

85.8 

72.7 

67.4 

93.8 

122.8 

Texas  (North): 

1912 

1913 

1914 

1915 

1916 

1917 

1918 

299 
581 
497 
307 
500 
728 
896 
2921 
4590 

124 
208 
221 
198 
145 
290 
285 
598 
1686 

11 
10 
26 
23 
38 
23 
10 
45 
233 

434 

799 

744 

528 

683 

1041 

1191 

3564 

6509 

28.6 
26.0 
29.7 
37.5 
21.2 
27.9 
23.9 
16.8 
29.5 

28,213 

57,435 

25,003 

52,663 

49,728 

51,128 

148,362 

1,736,712 

1,046,427 

94  3 

98.9 

50.3 

171.5 

99.5 

70.2 

165.5 

594.9 

228.2 

1919 

1920 

LouisLAJMA  (North) 

1912 

1913 

1914 

239 
356 
302 
349 
324 
302 
391 
518 

62 
93 
94 
89 

141 
99 
85 

119 

52 
70 
52 
26 
55 
56 
57 
67 
131 

353 
519 
448 
464 
520 
457 
533 
704 
1246 

17.6 
17.9 
20.9 
17.0 
27.1 
21.7 
15.9 
16  9 
30.0 

84,098 
151,955 
102,193 
198,116 
54,871 
59,272 
173,460 
453,669 
640,853 

359.9 
426.8 
338.4 
567.7 
169.4 
196  3 
443 . 6 
875.7 
735.0 

1915 

1916  

1917 

1918 

1919  

1920 

873   242 

*  From  compilation  by  Bates  and  Lasky  from  Oil  and  Gas  Journal. 


42 


THE    TREND   OF   OIL-FIELD    DEVELOPMENT 


wells  in  the  United  States  has  averaged  about  12  per  cent;  that  is, 
roughly  1  well  has  been  drilled  each  year  for  every  8  wells  producing. 
The  trend  of  the  number  of  new  wells  in  comparison  with  the  old 
wells  is  shown  for  a  number  of  years  in  Table  19. 


Table   19. — Producixg  Wells  and  New  Wells  Completed  in  the  United 
States  by  Years,  1908-1920 

(Data  from  U.  S.  Geological  Survey) 


Producing  Wells, 

Dec.  31 

(Thousands  of  Wells) 

Average  Daily 

Production  per  Well 

(Approximate) 

(Barrels) 

Wells  Completed 

During  Year 

(Thousands  of  Wells) 

1908 

142 

16.9 

1909 

147 

3.3 

18.3 

1910 

148 

3.7 

14.9 

1911 

153 

3.6 

13.8 

1912 

158 

3.8 

17.2 

1913 

169 

3.9 

25.6 

1914 

179 

4.1 

22.9 

1915 

181 

4.5 

14.0 

1916 

189 

4.4 

24.6 

1917 

197 

4.5 

23.1 

1918 

203 

4.7 

25.6 

1919 

29.0 

1920 

259* 

4.9* 

34.0 

*  October  31. 

Fig.  15  illustrates  how  the  mounting  production  of  crude  petro- 
leum has  been  dependent  upon  an  increasing  campaign  of  drilling 
and  a  growing  number  of  producing  wells.  The  general  conformance 
in  trend  between  the  three  curves  appearing  in  Fig.  15  should  not 
escape  attention. 

The  output  of  petroleum  depends  upon  the  total  yield  from  old 
wells  plus  the  production  of  new  wells,  each  of  the  two  components 
of  the  total  being  a  function  of  the  number  of  wells  and  their  average 
productivity.  Since  wells  display  individually  a  declining  production, 
the  composite  output  can  be  maintained  or  increased  only  by  adding 
new  production  in  sufficient  degree  to  compensate  for  the  falhng 
off  in  old  production.  For  example,  the  average  dechne  of  produc- 
tion in  the  Mid-Continent  field  is  17  per  cent  of  the  preceding  year.^ 

1  See  Bates  and  Lasky,  Statistical  Review  of  Mid-Continent  Field,  National 
Petroleum  News,  March  30,  1921,  p.  71. 


PRODUCING  WELLS  AND  NEW  WELLS  COMPLETED 


43 


In  1919  this  field  produced  197  million  barrels;  if  no  new  wells  had 
been  drilled  during  1920,  the  production  in  1920  would  have  fallen 
to  164  milhon  barrels.  In  1920,  however,  14,000  oil-wells  were 
drilled  in  this  field  and  the  total  output  of  the  field  was  249  million 
barrels.  Thus  new  production  to  the  extent  of  85  million  barrels 
was  contributed  by  the  14,000  new  wells  drilled  during  the  year,  or 
approximately  6000  barrels  for  each  new  well.  The  average  initial 
daily  production  of  the  new  wells  in  1920  was  188  barrels;  assuming 
an  even  rate  of  drilling  throughout  the  year,  the  new  wells  averaged 
six  months'  performance  each.     Consequently,  the  average  output 


MILLIONS  OF   BARRELS 

AND 
THOUSANDS   OF  WELLS 

500 


400 
300 

200 


1           1 

BtS^ 

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foceij; 

J^ 

MU^ 

5°^ 

p 

jODUc; 

ION   Ot 

CBi^S 

t^ 

ISANDS 

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5M»5>.-'J 

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f-tts 

/ 

\ 

/ 

/ 

1909 

1910 

1911 

1912 

1913 

1914 

1915 

1916 

1917 

1918 

1919 

1920 

100 

50 
40 

30 
20 


Fig.  15. — Comparison  of  producing  wells,  new  wells,  and  production  of  crude 
petroleum  in  the  United  States  by  years,  1908-1920;  data  from  U.  S.  Geo- 
logical Survey. 

per  new  well  for  the  year  would  have  been  34,300  barrels  (188X365 
-^2),  if  output  had  been  sustained  at  the  initial  rate.  The  factor  of 
decline,  however,  brought  the  performance  down  to  6000  barrels,  a 
discount  of  83  per  cent. 

New  production  is  not  reported  directly  by  the  oil  journals  or 
other  statistical  sources,  but  may  be  calculated  from  a  knowledge  of 
the  wells  drilled  and  their  average  initial  daily  production,  if  the 
average  annual  rate  of  decline  is  also  known.  The  trend  of  the 
number  of  wells  drilled  and  their  initial  unit  output  in  the  Mid- 
Continent  field  is  plotted  on  a  ratio  scale  in  Fig.  16  from  data  given  in 
Table  18.  The  effects  of  the  development  of  the  Cushing  pool  in 
1914-1915,  and  of  the  bringing  in  of  large  wells  in  Oklahoma,  North 


44 


THE    TREND    OF   OIL-FIELD    DEVELOPMENT 


Texas,  and  Louisiana  in  1919  are  strikingly  shown.  The  fact  that 
no  new  pools  of  large  size  were  brought  into  production  during  1920 
resulted  in  a  reduction  in  the  average  initial  production  per  well 
from  253  barrels  in  1919  to  188  barrels  in  1920,  as  clearly  shown  in 
the  chart.  This  decline  in  unit  production,  however,  was  compen- 
sated by  the  greater  number  of  new  wells  brought  in,  so  that  new 

4000 


3000 

2000 
1500 

1000 
900 
800 
700 
600 
500 

400 
300 

200 
150 


100 
90 
80 
70 
60 

50 
40 

30 


) 

TOTA 

.   INITIA 

.    PRODUCTION 

/ 

(I 

NITS  OF 

,000  BBL 

'•) 

> 

/ 

/ 

\, 

y 

/ 

"^-..^^^ 

/ 

/ 

/ 

/ 

f 

/ 

/ 

1 
1 

AVERAC 

IE   INITI 
(UNITS  0 

\\.    PRODUCTIOh 

■   1    BBL.)                      1 

1                 / 

4    PER   V\ 

/ELL 

1 
1 
1 

/ 
1 
1 

1 
1 

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1 
1 
1 

i 

^""^^•-v.^ 

,.^ 

/   '^\ 

/ 

/ 

'               \                    / 

/-- 

/     A  i  / 

\ 

W  WELLS    DRILLED 

(UNITS  OF   100  wells) 

1913      1914      1915     1916      1917      1918     1919      1920      1921 


Fkj.  16. — Trend  of  drilling  activity  in  the  Mid-Continent  field 
by  years,  1913-1920. 

production  mounted  from  48  million  barrels  in  1919  to  85  million  in 
1920. 

Relation  between  Production  and  New  Wells  Completed. — The 

dependence  of  production  upon  the  }>ringing  in  of  new  wells  is 
shown  for  the  Mid-Continent  field  in  Fig.  17,  in  which  the  volume 
of  production  is  plotted  on  a  ratio  scale  against  the  number  of  new 
wells  by  months  for  the  period  of  1917-1921.     It  is  immediately 


PRODUCTION    AND   NEW   WELLS   COMPLETED 


45 


apparent  that  the  upward  trend  of  the  production  curve  is  supported 
by  a  corresponding  trend  for  the  number  of  new  wells.  The  latter 
curve,  however,  shows  a  marked  seasonal  variation,  reaching  a 
maximum  in  the  summer  months  and  declining  during  the  winter 
months.  This  seasonal  characteristic  of  drilling  has  a  systematic, 
but  deferred  and  modified  effect  upon  production,  which  shows  a  less 
accentuated  response  to  the  season.     In  addition,  the  number  of 


MILLIONS  OF 

BARRELS  AND 

THOUSANDS 

OF  WELLS 


oo 

90 

1 

80 
70 

60 

50 
40 
30 

20 

PF 

ODL 

CTl 

JN^ 

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\/ 

V- 

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I 

■''''^ 

10 

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5 



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17 

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18 



19 

19 

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19 

20 

19 

21 

DECREASE 
-(.100^ 
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60 

H4-  40 
+  20 

-4       o 

-  10 

-  20 

-  so 

-  40 

Ll_  50^ 


Fig.  17. — Relation  of  wells  completed  to  production  in  the  Mid-Continent  Field 
by  months,  1917-1920. 

completions  is  influenced  by  general  economic  conditions,  though 
to  a  less  degree  than  might  be  expected,  as  illustrated  by  the  rela- 
tively moderate  decline  in  new  completions  during  the  industrial 
depression  of  1920-21,  the  recession  shown  being  httle  more  than 
the  normal  seasonal  decline.  The  competitive  factor  here  is  so 
powerful  that  drilling  activity  responds  only  with  reluctance  to 
depressing  influences. 

Decline  Curves. — The  importance  of  driUing  for  the  maintenance 
of  a  mounting  production  of  petroleum  is  exemplified  by  the  declining 


46 


THE    TREND    OF    OIL-FIELD    DEVELOPMENT 


production  invariably  displayed  by  a  single  well  or  group  of  wells,  if 
unsupported  by  the  bringing  in  of  new  wells.  The  typical  course  of 
an  oil-producing  property  is  shown  in  Fig.  18,  where  the  production 
of  a  group  of  actual  wells  in  Oklahoma  is  plotted  on  a  ratio  scale. 
By  fitting  a  straight  Une  to  the  curve  and  determining  its  slope,  it 
BARRELS  becomes    apparent 

that  the  rate  of 
decline  averaged  40 
per  cent  a  j^ear  for 
the  ten-year  period 
under  obsers'^ation. 
The  production  of 
the  country  is  mere- 
ly a  composite  of  a 
great  number  of  in- 
dividual properties, 
each  yielding  de- 
cline curves  after 
drilling  is  com- 
pleted. 

After  a  regional 
group  of  properties, 
or  field,  reaches  its 
maximum    produc- 
tion, it  enters  upon 
a    long    course    of 
decline,  as  may  be 
seen    in    Fig.     21, 
page  55.     The  en- 
trance     upon     the 
decline  comes  when 
the   production    of 
new  wells  fails   to 
■"1907  1908  1909  1910  1911  1912  1913  1914  1915  1916     make    up    for    the 
Fig.  18.— Decline    in    output    of    a    tjijical  Oklahoma    decrease  of  the  old. 
property  over  a  ten-year   period;   data  from  Arnold    Although  this  situ- 
and  Darnell.  ation  has  overtaken 

a  number  of  fields, 
it  has  not  yet  dominated  the  aggregate  of  fields,  although  it  soon  may 
be  expected  to  do  so.  The  dechne  curve  of  the  country  as  a  whole  can 
scarcely  be  predicated  on  the  basis  of  the  dechne  curves  of  the  older 
fields,  since  changing  technology'  and  rising  price  may  be  expected  to 
considerably  modify  the  decline  curves  we  know  from  experience. 


UjUUU 

\ 

5,000 

> 

\\ 

V 

'LINE   OF  4'o;e  ANNUAlIdECl'iNE 
\    /CURVE  SHOWING   ACTUAL   DEC 

-INE    1 

N 

\ 

J?\ 

RECORDED 

PRODUCTIO 

H 

2,000 

N.  s 

N 

1,000 

sj 

K. 

^ 

500 

-V 

k 

\ 

300 
200 

100 

\, 

\ 

\  \ 
\\ 

\  \ 

\ 

fv 

50 

V 

\ 

30 

1 

20 

FUTURE  PRODUCTION  BY  DECLINE  CURVES      47 

Estimating  Future  Production  by  Decline  Curves. — Many 
thousand  decline  curves  have  been  plotted  by  petroleum  engineers, 
and  afford  a  mass  of  recorded  experience  indicating  that  decline  curves 
are  notably  symmetiical.  It  has  also  been  proved  by  experience 
that  such  curves  "  can  be  extended  beyond  the  actual  period  of 
production  by  continuing  the  curves  in  accordance  with  their  sym- 
metry and  that  such  projections,  if  skillfully  made,  provide  fairly 
trustworthy  estimates  of  the  future  production  of  the  well."  ^  The 
technique  of  employing  production  data  for  estimating  oil  reserves 
and  the  rate  at  which  the}^  may  be  recovered  has  been  skillfully 
developed,  and  the  valuation  of  oil  properties,  with  due  allowance  for 
depreciation  and  depletion,  has  been  made  a  quantitative  procedure. 
The  requirements  of  the  U.  S.  Treasury  in  regard  to  the  taxation  of  oil 
properties  have  greatly  stimulated  the  accuracy  of  appraisals,  since 
the  rulings  of  the  Treasury  have  been  carefully  drawn  up  on  a  scien- 
tific basis  by  a  corps  of  able  petroleum  geologists  and  engineers, 
and  carelessly  prepared  tax  returns  are  not  accepted. 

Conclusion. — Petroleum  exploration  and  drilling  are  more  or  less 
amenable  to  the  ordinary  accelerating  or  retarding  factors  that  affect 
industrial  operations  in  general;  but  the  output  of  crude  petroleum, 
under  the  impetus  of  a  small-unit  competition  that  cannot  afford  to 
let  up  substantially  under  any  cncumstances,  proceeds  without 
regard  to  outside  pressure.  In  consequence,  the  production  of  crude 
petroleum  responds  quite  laggardly  to  changed  conditions,  being 
affected  mainly  in  its  exploration  and  drilling  stage  several  months 
removed  from  production  proper.  The  necessity  for  an  ever- 
expanding  campaign  of  drilling  to  replace  the  declining  output  of  old 
wells  places  a  cumulative  burden  upon  oil-field  exploitation  which 
cannot  be  perpetually  borne.  Sooner  or  later  new  wells  in  adequacy 
cannot  be  found  and  the  production  of  the  country  as  a  whole  will 
inevitably  display  the  decline  that  inexorably  affects  the  well,  the 
property,  the  pool,  and  the  field;  a  waning  output  will  supervene  and 
the  production  curve  of  the  country  will  describe  a  declining  course, 
gentler  in  slope  perhaps  than  the  composite  curves  we  now  know  from 
experience,  forcing  into  prominence  far-reaching  changes  in  tech- 
nology and  economic  procedure,  profoundly  affecting  the  com- 
position and  structure  of  the  petroleum  industry. 

'  Arnold,  Darnell,  and  others.  Manual  for  the  Oil  and  Gas  Industry  under  the 
Revenue  Act  of  1918,  N.  Y.,  1920,  p.  85.  See  also  Real,  The  Decline  and  Ultimate 
Production  of  Oil-wells,  with  Notes  on  the  Valuation  of  Oil  Properties,  U.  S. 
Bureau  of  Mines,  Bull.  117,  1919. 


CHAPTER   IV 
TREND  OF  OIL  PRODUCTION 

The  production  of  crude  petroleum  is  strongly  influenced  by  the 
geological  conditions  under  which  it  occurs  and  the  economic  cir- 
cumstances under  which  it  is  dominantly  exploited.  Its  liquidity 
and  occurrence  under  pressure,  on  the  one  hand,  lead  to  prolific  out- 
flow when  once  productive  deposits  are  tapped ;  while,  on  the  other, 
its  development  from  surface  properties  that  divide  the  underground 
mineral  unit  into  many  arbitrary  portions,  institutes  a  competitive 
extraction  that  does  not  decline  materially  in  the  face  of  over- 
production. These  circumstances,  which  are  unique  with  petro- 
leum, coupled  with  the  pioneer  spirit  that  has  been  present  in  this 
country,  are  responsible  for  a  mounting  output  remarkable  for  its  rate 
of  increase.  Moreover,  because  of  its  ready  adaptability  to  service, 
the  quantity  produced  has  always  been  able  to  force  room  for 
itself  in  low-use  directions  after  the  higher  demands  for  its  products 
wei'fe  satisfied,  fo  a  considerable  degree,  therefore,  the  yield  of 
crude  petroleum  has  been  promoted  by  factors  forcing  the  output  in 
advance  of  fundamental  requirements,  which,  in  turn,  has  stimu- 
lated a  rigorous  extension  of  markets  and  uses,  but  with  surplus 
always  in  evidence  to  find  an  outlet  as  fuel.  In  short,  supply  has 
shaped  demand. 

The  Mounting  Course  of  Production. — The  economic  character- 
istics of  petroleum  just  outlined  serve  to  explain  the  remarkable  rise 
of  production  in  this  country  from  less  than  one  million  barrels  in 
1860  to  443  miUion  barrels  in  1920.  Fig.  19  depicts  on  a  ratio  scale 
the  steep  slope  of  the  production  curve  over  the  past  sixty  years, 
from  which  it  is  apparent  that  the  output  has  roughly  doubled  every 
ten  years.  A  closer  analysis  of  this  curve  reveals  the  fact  that  its 
trend  from  1860-1880  averages  13  per  cent  a  year;  from  1880-1900, 
6  per  cent  annually;  and  from  1900-1920,  10  per  cent  yearly.^ 
The  smoothness  of  the  curve  during  the  past  decade,  as  compared 
with  previous  decades  or  production  curves  of  other  materials,  is 

1  Determined  graphically  by  fitting  straight  lines  by  inspection  to  the  three 
portions  of  the  curve. 

48 


COMPARISON   WITH   GROWTH   OF   COUNTRY 


49 


worthy  of  note  as  reflecting  close  conformity  to  a  geometric  pro- 
gression. 

Comparison  with  Growth  of  Country. — The  production  of  crude 
petroleum  has,  of  course,  increased  far  more  rapidly  than  population, 


Fig.  19. — Growth  in  the  production  of  crude  petroleum  in  the  United  States, 
by  years,  1860-1920,  compared  with  the  output  of  pig  iron,  increase  in  popu- 
lation, and  other  indices. 

as  illustrated  by  Fig.  19  which  measures  the  rate  of  growth  of  each. 
In  1902  the  per  capita  production  of  petroleum  was  1  barrel,  while 
by   1920  this  ratio  had  increased  to  4.3  barrels.     In  this  respect 


50  TREND  OF  OIL  PRODUCTION 

petroleum  shares  distinction  with  most  of  the  other  minerals,  as 
contrasted  with  agricultural  products  which  display  rates  of  growth 
roughly  parallel  to  the  population  increase. 

Of  greater  significance,  however,  is  a  comparison  with  the  indus- 
trial growth  of  the  country.  Such  a  comparison  is  afforded  by 
plotting  pig  iron  production  against  crude  petroleum  output,  as 
given  in  Fig.  19.  An  extensive  investigation  of  the  physical  produc- 
tion of  the  United  States  by  E.  E.  Day  of  the  Harvard  University 
Committee  on  Economic  Research  has  shown  that  pig  iron  produc- 
tion is  the  best  single  index  of  manufacturing  activity  available  and 
in  fact  shows  a  remarkably  close  conformance  with  the  composite 
index  calculated  from  a  wide  range  of  production  data.^  It  is 
apparent  from  Fig.  19  that  the  curves  for  crude  petroleum  and  pig 
iron  show  a  fairly  parallel  development  for  the  period  1860-1900, 
but  from  1900  to  1920  petroleum  displays  the  more  rapid  increase. 
It  was  during  the  latter  period,  of  course,  that  the  great  oil-fields  of 
the  Mid-Continent,  Gulf  Coast,  and  California  regions  came  into 
flush  production,  and  the  output  of  petroleum  in  consequence  went 
ahead  of  the  normal  industrial  growth  of  the  country  (see  Fig.  22). 

An  index  of  the  growth  in  the  country's  productivity  as  pre- 
pared by  Walter  W.  Stewart  is  introduced  into  Fig.  19  to  afford 
further  comparison  of  the  degree  to  which  petroleum  output  has 
forged  ahead  of  the  average  production  of  all  conmiodities  in  the 
past  twenty  years.  The  angle  between  the  two  curves  is  a  measure 
of  this  divergence  and  is  strikingly  great;  the  conformance  between 
the  two  curves  from  1890  to  1900  should  also  be  noted. 

The  rise  of  automotive  transportation,  which  has  largely  taken 
place  since  1912,  has  profoundly  affected  the  oil  industry,  and  the 
relationship  between  crude  oil  production  and  automotive  registra- 
tions is  quantitatively  shown  by  a  comparison  of  Curves  A  and  E  in 
Fig.  19.  The  steepness  of  Curve  E  is  notable,  but  is  the  characteris- 
tic slope  of  industrial  youth. 

Relation  to  Other  Countries. — For  many  years  the  United  States 
has  been  producing  around  two-thirds  of  the  petroleum  brought  to 
the  surface  in  the  world.  Her  two  largest  competitors  in  produc- 
tion have  been  Russia  and  Mexico,  the  three  countries  combined 
turning  out  around  90  per  cent  of  the  world's  supply.  The  trend 
of  production  in  these  leading  covmtries  is  presented  in  Fig.  20,  where 
the  slopes  of  the  lines  are  proportional  to  the  percentage  changes  and 
the  curves  are  consequently  directly  comparable.  The  marked 
parallelism  between  Curves  A  and  B  is  readily  understandable  in 
view  of  the  dominant  contribution  to  the  world's  supply  made  by 
1  The  Review  of  Economic  Statistics,  Dec,  1920,  p.  367. 


TREND  OF   PRODUCTION   BY   FIELDS  51 

the  United  States.  Production  in  Russia  (Curve  C)  shows  a  rapid 
development  in  1880-1890,  a  sharp  but  less  accentuated  rise  between 
1890  and  1900,  exceeding  the  output  of  the  United  States  in  1898 
and  the  three  years  subsequent,  and  a  fluctuating  but  somewhat 
declining  course  during  the  two  decades  of  the  present  century,  with 
an  abrupt  decline  in  1917. 

Mexico  (Curve  D)  displays  a  phenomenal  growth  in  production 
from  approximately  1  million  barrels  in  1906  to  163  million  barrels 
in  1920,  with  a  tendency  throughout  the  past  decade  to  increase 
at  the  rate  of  about  25  per  cent  a  year.  The  curve  for  Mexican 
production  is  characteristically  that  of  a  youthful,  flush  producer, 
with  somewhat  greater  steepness  than  normal  because  of  the  unusu- 
ally large  wells  in  that  country. 

The  data  upon  which  Fig.  20  is  based,  together  with  production 
figures  for  the  less  important  countries,  are  presented  in  Table  20. 

Trend  of  Production  by  Fields. — The  production  of  the  United 
States  as  a  whole  is  a  composite  of  many  individual  fields,  some 
young  and  growing  in  output,  others  mature  and  stable,  still  others 
old  and  waning  in  vigor.  It  is  necessary,  therefore,  to  bring  the  com- 
ponents of  the  country's  supply  into  comparison,  in  order  to  analyze 
their  relationships  one  to  another  and  to  the  whole.  For  this  pur- 
pose, the  productions  of  the  various  oil-fields  since  1900  are  plotted 
on  a  ratio  scale  in  Fig.  21,  which  reflects  the  trend  of  each  contributor. 
The  chart  is  somewhat  confusing  because  of  the  necessarily  large 
number  of  curves  appearing  upon  it,  but  the  complex  of  lines  reveals 
unmistakably  the  tendency  of  all  fields  to  spring  quickly  into  prom- 
inence, to  maintain  themselves  with  fluctuations  for  a  period,  and 
then  to  enter  upon  a  long  decline.  The  curve  for  Illinois  is  typical 
and  represents,  with  due  qualifications,  the  course  to  be  followed  by 
the  immature  fields,  such  as  North  and  Central  Texas  and  the  Rocky 
Mountain,  of  whose  trend  curves  only  the  early,  youthful  portions 
appear  in  the  chart.  Study  of  Fig.  21  will  emphasize  the  degree  to 
which  the  maintenance  of  the  total  output  is  dependent  upon  the  com- 
ing in  of  a  growing  number  of  new  fields,  as  the  older  fields  in  increas- 
ing numbers  enter  upon  a  waning  course.  It  is  obvious,  and  indeed 
susceptible  of  rigorous  mathematical  proof,  that  a  progression  of  this  • 
kind  must  eventually  reach  a  point  where  the  declining  functions 
will  dominate  and  force  the  composite  curve  downward. 

The  significance  of  Fig.  21  can  scarcely  be  over-stressed.  The 
semi-logarithmic  scale  upon  which  the  data  are  plotted  yields  a  type 
of  curve  that  truly  reflects  a  picture  of  all  the  complex  factors — 
physical,  chemical,  geological,  economic,  and  psychological — that 
enter  into  production.     The  curves  are  not  merely  graphic  expressions 


52 


TREND  OF  OIL  PRODUCTION 


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Fk;.  20. — The  annual  production  of  crude  petroleum  in  the  United  States  com- 
pared with  other  leading  countries,  1880-1920. 


54 


TREND  OF  OIL  PRODUCTION 


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TREND  OF   PRODUCTION   BY   FIELDS 


55 


1900 


1905 


1910 


1915 


1920 


Fig.  21. — Trend  of  petroleum  product  ion  in  the  United  .State.s,  1900-1920, 

by  fields. 


56 


TREND  OF  OIL  PRODUCTION 


of  statistics;  they  are  visualizations  of  economic  forces;  and  while 
these  forces  cannot  always  be  resolved  into  their  components,  they 
can  be  observed,  measured,  weighed  against  one  another,  and  with 
due  precaution  projected  ahead. 

Production  data  by  states  and  by  fields  for  a  number  of  years 
past  are  given  in  Tables  21  and  22. 


Table  22. — Petroleum  Produced   in  the   United  States,  1913-1920,   by 

Fields 


Data  from  U.  S 

Geological  Sun^ey 

Year 

Appala- 
chian 

Lima- 
Indiana 

Illinois 

Mid- 
Continent 

Gulf 

Rocky 
Mts. 

Califor- 
nia 

United 
States 

II 
1"" 

o 

o 
y. 

St 

s 

o 

z 

y. 

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Z 

X 

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m 

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Z 

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a 
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X 

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p 

Si 
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X 

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a 

Si 

c  — 

u 

X 

o 

73 

c 

1913 

25.9 

100 

4.77 

100 

23.9 

100 

84.9 

100 

8.. 54 

100 

2.60 

100 

97.8 

100 

248 

100 

1914 

24.1 

93 

5.06 

106 

21.9 

92 

98.0 

115 

13.1 

153 

3.78 

145 

99.8 

102 

266 

107 

1915 

22.9 

88 

4.27 

90 

19.0 

80 

123 

145 

20.6 

241 

4.45 

171 

86.6 

89 

281 

113 

1916 

23.0 

89 

5.06 

106 

17.7 

74 

137 

161 

21.8 

256 

6.48 

249 

91.0 

93 

301 

121 

1917 

24.9 

96 

4.27 

90 

15.8 

66 

164 

193 

24.3 

285 

9.20 

354 

93.9 

96 

335 

135 

1918 

25.4 

98 

3.91 

82 

13.4 

56 

179 

211 

24.2 

28412. 8 

492 

97.5 

100 

356 

144 

1919 

29.2 

115 

3.44 

72 

12.4 

52|l97 

232 

20.6 

241  13.6 

523 

102 

104 

378 

152 

1920 

30.5 

118 

3.06 

64 

10.8 

45 1 249 

294 

26.8 

314  17.5 

673 

106 

108 

443 

178 

Composite  Character  of  Production. — The  composition  of  the 
production  curve  for  the  whole  country  is  interpreted  in  a  differ- 
ent manner  in  Fig.  22,  in  which  the  yields  of  the  various  fields  are 
superimposed  on  a  natural  scale.  This  chart  clearly  indicates  the 
wedge-like  character  of  the  growth — how  a  mounting  production 
becomes  increasingly  dependent  upon  the  development  of  new  fields. 
It  also  stresses  the  dominant  position  held  by  Oklahoma  and  Cali- 
fornia and  points  to  the  great  number  of  smaller  contributors  that 
must  be  found  to  compensate  for  the  decline  of  these  major  fields.  It 
should  be  observed,  moreover,  that  Oklahoma  started  downward  in 
1919  only  to  be  temporarily  revived  in  1920  by  the  sharp  rise  in  crude 
oil  prices  that  came  in  the  first  quarter  of  that  year,  and  that  Cali- 
fornia is  rapidly  approaching  its  peak.  The  important  contribution 
made  by  North  and  Central  Texas  in  1919-1920  should  not  escape 
attention  nor  should  the  fact  that  this  field  has  alread}^  seen  its  best 
days.  Fig.  22  may  be  profitably  examined  in  conjunction  with 
Fig.  21  since  the  two  present  complementary  analyses  of  the  trend  of 
production  that  may  sei-ve  as  the  basis  of  generalizations  as  to  the 
future. 


COMPOSITE  CHARACTER  OF  PRODUCTION 


57 


Figs.  21  and  22  show  clearly  the  marked  stimulation  in  output  that 
came  in  1920  under  the  influence  of  the  price  advance.  While  the 
extent  of  this  increase  in  output  is  an  encouraging  indication  that 
there  is  still  considerable  resilience  in  the  situation,  it  should  be 
remembered  that  the  cost  was  a  proportionately  greater  advance  in 
price,  and  there  is  obviously  a  limit  to  increases  gained  in  this  manner. 
(See  Chapter  18.) 

On  the  whole,  Figs.  21  and  22  indicate  that  production  in  the 
United  States  is  fast  approaching  its  limit,  and  there  is  much  evi- 
dence to  suggest  that  1921  will  register  the  maximum  rate  of  output 


MILLIONS 
OF  BARRELS 
440 


Fig.  22. — Production  of  crude  petroleum  in  the  United  States  by  years,  1890-1920, 
showing  the  relative  importance  of  the  contributions  made  by  the  individ- 
ual fields. 


that  this  country  will  enjoy.  It  should  be  observed  that  this 
deduction  is  based  upon  a  study  of  production  curves,  that  is  to 
ssiy,  is  the  result  of  mathematical  analysis,  and  is  not  predicated 
upon  estimates  of  the  size  of  the  unmined  supply.  The  apparently 
limited  quantity  of  petroleum  still  underground,  however,  offers 
additional  and  corroborative  evidence  of  our  proximity  to  the  peak 
of  production  in  the  United  States. 

Comparative  Importance  of  Fields. — The  relative  importance  of 
the  major  producing  fields  in  the  United  States  is  shown  in  Fig.  23, 
where  the  dominance  of  the  Mid-Continent  and  California  produc- 
tion is  outstanding.     The  main  advance  in  the  country's  output 


58 


TREND  OF  OIL  PRODUCTION 


in  1919-1920  is  readily  seen  to  lie  in  the  increased  productivity  of 
the  Mid-Continent  field,  comprising  Oklahoma-Kansas,  North  and 
Central  Texas,  and  North  Louisiana. 

The  relative  importance  of  the  two  major  fields  is  shown  in  per- 
centage form  in  the  table  following: 

Table  23. — Percentage  of  Country's  Total  Output  of  Crude  Petroleum 
Contributed  by  the  Mid-Continent  and  California  Fields,  1913-1920 


1 
1 

1 

Mid-Continent     i 

Year 

(Okla.-Kans.,  N.  | 

and  C.  Texas,      | 

N.  La.)            1 

California 

Others, 

United  States, 

Per  Cent 

Per  Cent 

Per  Cent 

Per  Cent 

1913 

34 

39 

27 

100 

1914 

37 

38 

25 

100 

1915 

44 

31 

25 

100 

1916 

46 

30 

24 

100 

1917 

49 

28 

23 

100 

1918 

50 

27 

23 

100 

1919 

52 

27 

21 

100 

1920 

56 

24 

20 

100 

The  Widening  Gap  between  Production  and  Consumption. — 

While  the  production  of  crude  petroleum  in  the  United  States  has 
been  growing  at  a  rapid  rate  (see  Fig.  19  and  Table  22),  the  con- 
sumption of  crude  petroleum,  since  1915  at  least,  has  been  increasing 
still  more  rapidly,  as  shown  by  the  following  series  of  index  numbers: 


Table  24. — Comparison  of  Domestic  Production  and  Consumption  of 
Crude  Petroleum,  in  Percentages  of  the  Figures  in  1913 

(Figures  for  1913  =  100) 


Year 

Production 

Consumption 

1913 

100 

100 

1914 

107 

100 

1915 

113 

105 

1916 

121 

122 

1917 

135 

145 

1918 

144 

158 

1919 

152 

161 

1920 

178 

204 

GAP  BETWEEN  PRODUCTION  AND  CONSUMPTION 


59 


It  is  thus  seen  that  from  1913- 
1920  domestic  production  in- 
creased 78  per  cent,  while  dur- 
ing the  same  period  consumption 
advanced  104  per  cent.  The 
discrepancy  was  made  possible 
by  the  growing  imports  from 
Mexico,  as  will  appear  from 
examination  of  Table  25,  which 
shows  also  the  method  emploj-ed 
in  calculating  consumption. 

The  monthly  trend  of  supply 
and  demand  for  the  period  1917- 
1920  is  shown  in  comparative 
form  in  Fig.  24,  which  represents 
an  interpretation  of  the  current 
situation.  Annual  data  show 
the  broad  features,  but  in  order 
to  appraise  the  fluctuations  within 
the  year,  recovu'se  must  be  had  to 
monthly  statistics.  The  curves 
appearing  in  Fig.  24  depict  the 
economic  forces  at  work,  and 
should  be  looked  at  as  a  moving 
picture  of  what  is  transpiring. 
The  semi-logarithmic  scale  upon 
which  the  data  are  plotted  re- 
duces the  fluctuations  to  a  per- 
centage basis,  thus  revealing 
the  trends,  permitting  accurate 
comparisons  to  be  made,  and 
interpreting  the  change  in  terms 
of  their  economic  signifi- 
cance. 

In  view  of  the  general  slow- 
ing down  in  industrial  activity 
during  1920,  it  is  interesting  to 
observe  the  increasing  production 
throughout  the  year,  together 
with  the  sharply  mounting  im- 
ports. These  conditions  alone 
were  shaping  up  for  a  temporary 
overproduction,    which   required 


KANSAS ■ OKLAHOMA 


t' 


CALIFORNIA 


-       I 
J     O 


d: 


U     O 

1    ^ 
-    1 

-1    o 

d: 


-1 — h 


Fig.  23. — Monthly  production  of  crude 
petroleum  during  1919  and  1920  by 
fields.  Note  the  outstanding  impor- 
tance of  the  Mid-Continent  field, 


60 


TREND  OF  OIL  PRODUCTION 


only  the  decline  in  demand  toward  the  close  of  the  year  to  precipi- 
tate a  falling  market. 

Trend  of  Stocks. — Between  production  and  utilization  there  is  a 
supply  of  crude  petroleum  of  considerable  magnitude  held  in  storage 


1       1 

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Fig.  24. — Trend  of  the  crude  petroleum  situation  in  the  United  States  by  months, 

1917-1921. 

by  (a)  producers,  (6)  pipe-lines  and  tank-farms,  and  (c)  refineries. 
Beginning  August,  1920,  the  U.  S.  Geological  Survey  classified  the 
petroleum  in  storage  according  to  the  division  given  above,  but  here- 


TREND   OF   STOCKS 


61 


tofore  statistics  of  stocks  have  been  available  for  (a)  pipe-line  and 
marketing  companies,  and  (6)  refineries.  Stocks,  as  usually  referred 
to  in  the  literature,  represent  the  oil  held  in  storage  by  the  pipe-line 
and  marketing  companies,  and  unless  otherwise  specified  the  term 
is  so  used  in  this  book. 

The  size  of  the  country's  stocks  of  petroleum  is  shown  in  Table  25 
for  the  period  1913-1920  in  comparison  with  production  and  con- 
sumption. It  is  apparent  that  the  stocks  have  for  some  years  aver- 
aged around  140  miUion  barrels,  although  both  production  and  con- 
sumption have  been  rapidly  progressing  in  size.  While  the  stocks 
from  1913-1916  may  have  been  a  trifle  ample  as  a  working  reserve, 
the  ratio  of  stocks  to  consvmiption  has  rapidly  fallen  subsequently. 
This  ratio  may  be  advantageously  expressed  in  terms  of  the  number 
of  months  during  which  the  stocks  could  supply  the  country's  require- 
ments, and  the  expression  shown  in  Table  26  for  1909-1920  is  illumi- 
nating, for  it  indicates  that  our  working  reserves  of  crude  petroleum 
have  fallen  from  an  eight-months'  supply  in  1910  to  a  three-months' 
supply  in  1920. 

Table  2.5. — Comparison  of  Domestic  Production  and  Consumption  of 
Crude  Petroleum  by  Years,  1913-1920 

(Data  from  U.  S.  Geological  Survey) 

(In  uiillions  of  barrels) 


Year 

Domestic 
Pro- 
duction 

Imports 

Exports 

Net 
Imports 

Avail- 
able 
(Prod. 
+  Net 
Imports) 

Stocks 

End 

of 

Year 

Changes 
in 

Stocks 

Consump- 
tion 

Crude 

Run 

to 

Stills 

1913 

248 

17.8 

4.6 

13.2 

261 

122.8 

-  0.1 

261 

1914 

266 

17.2 

2.9 

14.3 

280 

141.6 

+  18.8 

261 

191 

191.5 

281 

18.1 

3.7 

14.4 

295 

163.8 

+22.2 

273 

191G 

301 

20.6 

4.0 

16.6 

318 

162.4 

-   1.4 

319 

247 

1917 

33.5 

30.1 

4.0 

26.1 

361 

146.0 

-16.4 

378 

315 

1918 

356 

37.7 

4.9 

32.2 

387 

121.7 

-24.3 

413 

326 

1919 

378 

52.8 

5.9 

46.8 

424 

127.9 

+  6.2 

418 

.361 

1920 

1 

443 

106 

8.0 

98.0 

541 

138.2* 

+  10.3 

531 

434 

♦Includes  Mexican  stocks  held  in  United  States  by  importers  (5.8  million  barrels). 


Stocks,  of  course,  ixrv  a  rather  sensitive  barometer  of  the  month- 
to-month  fluctuations  in  tlK>  relation  l)etween  supply  and  demand, 
any  sustained  aceuniiilation  of  stocks  being  normally  followed  by  a 
decrease  in  market  price,  and  vice  versa. 


62 


TREND  OF  OIL  PRODUCTION 


Table  2G. — Tke.nd  of  the  Stocks  of  Crude  Petroleum  in  the  United  States 
IX  Terms  of  the  Country's  Requirements 


Year 

Stocks  at  End  of  Year 
(Millions  of  Barrels) 

Monthly  Consumption 
(Millions  of  Barrels) 

Number  of  Months 

Supply  Represented  by 

Stocks 

1909 

117 

13.9 

8 . 4  months 

1910 

131 

16.0 

8.2       " 

1911 

137 

17.6 

7.8       " 

1912 

123 

20.0 

6.2       '* 

1913 

123 

21.8 

5.7       " 

1914 

142 

21.8 

6.5       *' 

1915 

164 

22.8 

7.2      " 

1916 

162 

26.5 

6.1       " 

1917 

146 

31.4 

4.7       " 

1918 

122 

34.5 

3.5       " 

1919 

128 

35.0 

3.7       " 

1920 

134 

44.3 

3.0       " 

MONTHS 

10 
9 
8 

7 

6 


MILLIONS 

OF 
BARRELS 

200 


1 

1     1     1     1 

.^ 

RELATIVE  STOCKS 

^        IN  ^ 

UMB 

:r  of 

MONTHS 

I          1 

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y" 

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K 

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X 

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MILL 

JAL 

IONS 

STO 

OF  B 

CKS 

ARRE 

LS 

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- 

-10% 
J-20'/S 
l-SO'"* 

-40% 

-50jf 


1-70^ 


1910    1911   1912  1SI3   1914   |915  1916  1917  1918  1919  192C   1921 


Fig.  25. — Chart  showing  the  change  in  the  actual  and  relative  quantity  of  crude 
petroleum  in  storage  in  the  United  States  by  years,  1909-1920. 

Conclusion. — It  may  be  gathered  from  the  data  presented  in 
this  chapter  that  the  production  of  crude  petroleum  in  the  United 
States  has  enjoyed  a  remarkable  and  sustained  rise  to  the  startling 
level  of  443  million  barrels  in  1920;  that  the  rapid  increase  in  output 


CONCLUSIONS  63 

has  drawn  Into  production  a  growing  proportion  of  the  resource; 
that  the  mounting  volume  of  oil  thrown  on  the  market  has  pro- 
moted a  wide  range  of  uses  which  in  turn  have  gathered  impetus  and 
stimulated  a  consumption  met  with  difficulty  by  the  combined  pro- 
duction of  the  United  States  and  Mexico.  The  situation  has  shown 
an  accretionary,  accelerating  growth  which  cannot  be  indefinite^  sus- 
tained and  there  is  much  evidence  to  sound  a  warning  that  the  turn- 
ing-point is  near  when  our  growing  dependence  upon  petroleum  can 
no  longer  be  met  by  efforts  looking  merely  to  an  increase  in  supply, 
but  changes  in  technology  and  economic  procedure  will  be  called 
into  action  to  multiply  the  service  obtained  from  the  quantities 
available. 


CHAPTER  V 
THE  TRANSPORTATION  OF  CRUDE  PETROLEUM 

The  liquidity  of  crude  petroleum  has  led  to  the  development  of  a 
remarkable  system  of  transportation  without  parallel  in  its  cheapness 
and  efficiency.  This  sj^stem  comprises  a  network  of  pipe-lines 
spread  over  much  of  the  country,  supplemented  by  specially  designed 
tank-steamers  for  coastwise  and  foreign  trade.  A  relatively  small 
quantity  of  crude  petroleum  is  handled  by  the  railroads  in  tank-cars. 
To  a  preponderant  degree,  therefore,  the  movement  of  crude  oil  is 
independent  of  the  normal  transportation  agencies  upon  which  com- 
modities in  general  depend. 

Pipe-lines.^ — The  oil  pipe-line,  first  introduced  about  fifty-six 
years  ago,  has  so  developed  that  now  the  American  petroleum  indus- 
try is  served  by  a  pipe-line  system  nearly  50,000  miles  in  aggregate 
length,  approximately  IS  per  cent  of  the  combined  length  of  all  the 
railroads.  The  magnitude  of  this  arterial  complex  pulsating  with 
oil  has  been  frequently  overlooked  in  considering  the  role  played  by 
transportation  in  the  resource  development  of  the  United  States. 
A  comparison  with  the  railway  systems  of  the  country  is  afforded  in 
Table  27. 

Table  27. — Comparison  between  the  Oil  Pipe-lines  and  the  Railroads  of 

THE  United  States 


Number  of 
Miles 

Relative, 
Per  Cent 

Number  of  Miles 

per  100  Square 

Miles  of 

Territory 

Estimated 

Value 

(Millions  of 

Dollars) 

Oil  pipe-lines  * .  .  .  . 
Railroads  f 

45,. 500 
2.53,626 

18 
100 

1.53 
8.53 

500 
19000 

*  Estimated  for  1920:    Trunk  lines,  34,000  miles;    gathering  lines,  11,500  miles, 
t  1917. 


1  For  a  detailed,  though  slightly  out  of  date,  description  of  the  Mid-Continent 
pipe-line  system,  consult  Report  on  Pipe-line  Transportation  of  Petroleum, 
Federal  Trade  Commission,  1916.  The  pipe-lines  of  Wyoming  are  described  in 
Report  on  the  Petroleum  Industry  of  Wyoming,  Federal  Trade  Commission,  1921. 

64 


PIPE-LINES  65 

As  the  term  is  used  in  the  oil  industry,  a  pipe-line  is  not  merely 
a  line  of  pipe,  but  consists  of  the  whole  plant  employed  in  the  process 
of  transportation,  including  initial,  intermediate,  and  terminal 
tankage  systems,  power  plants,  pumping  stations,  systems  of  com- 
munication along  the  line,  and  all  other  things  necessary  to  safely 
and  expeditiously  move  the  oil  from  one  point  to  another. ^  The 
pipe-line  system  includes  trunk-lines  extending  from  the  oil-fields 
to  the  refining  centers  and  gathering  lines  in  the  producing  areas 
that  act  as  feeders  to  the  main  channels.  There  are  approximately 
34,000  miles  of  trunk  lines  in  the  United  States,  the  most  important 
being  shown  in  Fig.  26.  The  combined  length  of  the  gathering 
lines  is  estimated  at  11,500  miles.  The  relation  of  gathering  lines 
to  trunk  lines  in  a  large  oil-pool  is  illustrated  in  Fig.  27. 

The  pipes  for  conveying  the  oil  are  made  of  steel  and  are  laid  near 
the  surface  of  the  ground.  The  main  lines  average  about  8  inches  in 
diameter,  with  the  gathering  lines  smaller.  The  oil  is  forced  through 
the  pipes  by  means  of  pumps  operated  by  steam  or  internal  combus- 
tion engines.  The  pumping  stations  in  the  eastern  and  mid-western 
region  are  usually  about  35  miles  apart ;  but  in  California  the  average 
interval  is  about  12  miles  because  of  the  greater  viscosity  of  the  oil 
and  the  necessity  of  heating  heav\^  oil  to  facilitate  its  movement. 
The  construction  cost  of  most  of  the  lines  was  about  OOOO  dollars  per 
mile,  based  on  S-inch  pipe;  and  the  average  pumping  station  cost 
from  130,000  to  250,000  dollars.  In  California  in  1914  the  cost  of 
building  an  8-inch  line,  including  stations,  was  about  20,000  dollars 
a  mile. 

Oil  is  produced  from  thousands  of  wells,  by  hundreds  of  pro- 
ducers, but  for  the  most  part  is  transported  by  a  few  large  pipe-line 
companies.  The  oil  from  the  wells  is  first  run  directly  into  the 
producer's  tanks,  where  it  has  a  chance  to  settle.  From  there  it 
flows  by  gravity  or  is  pumped  to  the  pipe-line  company's  working 
tanks,  either  through  lines  owned  by  the  producer  or  through  gath- 
ering lines  estabhshed  by  the  pipe-hne  company.  The  common 
practice  is  for  the  pipe-line  company  to  operate  gathering  lines 
which  begin  at  the  producer's  tanks  and  to  follow  up  new  production 
with  pipe-line  extensions. 

The  carrying  capacity  of  a  pipe-line  varies  wath  the  size  of  the 
pipe,  the  chstance  between  pumping  stations,  the  pressure  at  which  the 
oil  is  pumped,  and  the  viscosity  of  the  oil.  The  cubic  capacity  of  an 
8-inch  line  is  328  barrels  per  mile.     The  daily  capacity  of  an  8-inch 

'For  a  discussion  of  tliQ  oil  pipe-line,  consult  Forrest  M.  Towl,  Pipe-lines, 
Existing  Facilities  and  Future  Needs,  American  Petroleum  Institute,  Nov.  17, 
1920. 


66 


THE    TRANSPORTATION    OF    CRUDE    PETROLEUM 


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^-^'  c             ^ 

PIPE-LINES  67 

pipe-line,  operating  at  a  pressure  of  800  pounds  per  square  inch  and 
transporting  oil  of  38°  Baume  gravity,  is  21,000  barrels.  The  oil  in 
transit  in  pipes  east  of  California  at  the  end  of  1920  was  16,700,000 
barrels. 

The  average  daily  production  of  crude  petroleum  in  the  United 
States  in  1920  was  approximately  1,210,000  barrels.  Practically 
all  of  this  oil  was  transported  by  pipe-line.  Some  of  it  moved 
only  a  few  miles,  while  some  was  probably  carried  upward  of  1500 
miles.  About  150,000  barrels  per  day  was  taken  to  the  Atlantic 
seaboard  through  a  connecting  system  of  lines.  A  large  quantity 
was  delivered  to  Baton  Rouge  and  the  Gulf  ports  through  long  lines. 
Probably  the  entire  quantity,  approximating  200,000  tons  daily, 
moved  on  the  average  more  than  500  miles.^  The  movement  there- 
fore approximated  100  million  ton-miles  per  day.  The  daily  ton- 
miles  of  freight  hauled  by  the  railroads  of  the  country  are  slightly 
more  than  1  l)illion,  indicating  that  the  pipe-line  systems  reduce 
the  freight  load  of  the  United  States  by  something  like  10  per 
cent. 

In  addition  to  the  tanks  that  are  an  integral  operating  part  of  the 
pipe-line  system,  most  of  the  pipe-line  companies  provide  facilities 
for  storage  of  crude  petroleum  in  large  quantities.  Some  of  the 
storage-tank  farms  operated  by  the  pipe-line  companies  are  located 
in  the  oil-fields,  while  others  are  at  convenient  points  along  the  line 
or  at  its  terminus.  A  tank-farm  consists  of  a  group  of  circular  steel 
tanks,  generally  of  37,500  to  55,000  barrels  capacity,  separated  by 
earthen  banks  as  a  fire  protection.  Some  of  the  tank-farms  are  very 
extensive,  the  largest  having  capacities  upward  of  10  million  barrels. 
The  gross  pipe-line  and  tank-farm  stock  of  crude  petroleum  east  of 
California  at  the  end  of  1920  was  107  million  barrels. 

Congress  has  imposed  upon  the  pipe-line  companies  the  ol)liga- 
tions  of  common  carriers  and  has  placed  them  under  the  supervision 
of  the  Interstate  Commerce  Commission  "  for  the  purpose  of  assuring 
that  the  charges  and  facilities  for  transportation  shall  be  reasonable 
and  that  there  shall  be  no  discrimination  between  shippers."  Up 
to  the  present,  however,  comparatively  little  use  has  been  made  of 
pijx^-lines  as  common  carriers,  most  of  the  oil  produced  having 
been  purchased  by  the  pipe-line  companies  at  the  producer's  tanks, 
or  else  handled  by  integrated  interests  engaged  in  the  combined 
activity  of  production,  transportation,  and  refining.  Transporta- 
tion by  pipe-line  is,  of  course,  much  cheaper  than  by  railroad;  and 
the  economy  of  pipe-line  transportation  has  for  the  greater  part 
been  reflected  in  lower  prices  for  oil  products.     The  cost  of  trans- 

'  Towl,  loc.  cit. 


68 


THE    TRANSPORTATION    OF    CRUDE    PETROLEUM 


porting  crude  oil  in  1913  from  a  number  of  points  in  the  Mid-Con- 
tinent field  to  important  refining  centers  is  shown  in  Table  28. 

Table  28. — Cost  of  Transporting  Crude  Oil  in  1913  by  Pipe-line 
(Data  from  Federal  Trade  Commission) 


Shipping  Point 

Destination 

Distance 

(Miles) 

Trunk- 
line  Cost 
per 
Barrel 
(Cents) 

Gathering- 
line  Cost 
per 
Barrel 
(Cents) 

Combined 

Trunk 

and 

Gathering 

Cost  per 

Barrel 

(Cents) 

Gushing  Pool. .  . 
Gushing  Pool . . . 
Gushing  Pool... 
Gushing  Pool..  . 

Glenn  Pool .... 
Electra  Pool .  .  . 
Electra  Pool .  .  . 
Electra  Pool .  .  . 

Neodesha,  Kans 

Woodriver,  111 

Griffith,  Ind 

Port  Arthur,  Tex 

Baton  Rouge,  La. .  .  . 
Fort  Worth,  Tex .... 

Beaumont,  Tex 

Sabine,  Tex 

117.01 
505.54 
686 . 05 
583 . 09 

513.60 
137.74 
448.82 
479 . 36 

2.64 

8.45 

11.03 

21.61 

22.03 

3.48 

11.34 

19.16 

3.99 
3  99 
3.99 

5.08 

3.99 
5.45 
5.45 
5.45 

6.63 
12 .  44 
15 .  02 

26 .  69 

26.02 

8.93 

16.79 

24.61 

The  differences  between  the  published  pipe-line  tariff  rates  and 
railroad  rates  for  shipping  crude  petroleum  is  indicated  in  Table  29. 

Table  29. — Comparison  of  Pipe-line  ajnd  Railroad  Tariff  R.-vtes  for 
Shipping  Crude  Oil  between  Characteristic  Points  in  1916 
(Data  from  Federal  Trade  Commission) 


Shipping  Point 

Destination 

Railroad 

Tariff 

Rate 

per 

Barrel 

Trunk 
Pipe-line 
Tariff 
Rate 
per 
Barrel 

Margin 
Between 
Railroad 

and 
Pipe-line 

Rates 

Gushing  Pool .  .  . 
Gushing  Pool .  .  . 
Gusliing  Pool .  .  . 
Gushing  Pool .  .  . 
Gushing  Pool .  .  . 

Gushing  Pool .  .  . 
Gushing  Pool .  .  . 
Gushing  Pool .  .  . 
Gushing  Pool .  .  . 
Gushing  Pool .  .  . 

Gushing  Pool .  .  . 
Gushing  Pool .  .  . 
Gushing  Pool .  .  . 
Glenn  Pool 

Neodesha,  Kans 

Woodriver,  111 

Whiting,  Ind 

Cleveland,  Ohio 

Pittsburgh,  Pa 

$0,311 
.544 

.622 

.    .979 

1.054 

1.054 
1.348 
1.348 
1.320 
1.403 

.392 
.329 
.466 
.544 

$0,200 
.340 
.420 
.580 
.590 

.590 
.700 
.685 
.700 
.700 

.200 
.275 
.400 
.375 

so.'ui 

.204 
.202 
.399 
.464 

.464 
.648  • 
.663 
.620 
.703 

.192 
.054 
.066 
.169 

Buffalo,  N.  Y 

Philadelphia,  Pa 

Marcus  Hook,  Pa 

Baltimore,  Md 

Bayonne,  N.  J 

West  Dallas,  Tex 

Fort  Worth,  Tex 

Port  Arthur,  Tex 

Baton  Rouge,  La 

PIPE-LINES 


69 


The  pipe-line  has  exerted  a  far-reaching  influence  upon  the  petro- 
leum industry.  By  rapidly  following  up  new  oil-field  developments, 
it  has  afforded  the  ever-mounting  flow  of  crude  petroleum  an  outlet 


•5  .2 

bC  .22 

II 

ll 


o3 


o3 


O     a; 


o     >. 

Oh   a 


o  a 


fe 


to  markets.  Without  the  pipe-line,  tlic  petroleum  resource  could 
not  have  been  brought  so  rapidly  into  full  jsroduction;  and,  in  turn, 
without  the  notable  growth  in  oil  exploitation  that  this  country  has 
experienced,  the  pipe-line  coifld  not  have  been  stinuflated  to  its 
present  spread.     Th(^  pipe-line  is  l)y  nature  a  large-scale  ent(M-prise, 


70 


THE    TRANSPORTATION    OF    CRUDE    PETROLEUM 


and  it  is  not  surprising  to  find  the  development  of  the  pipe-line 
systems  of  the  country  largely  due  to  the  efforts  of  large  aggregates 
of  capital.  According  to  the  Federal  Trade  Commission/  about 
69  per  cent  of  the  trunk  pipe-line  mileage  of  the  country  is  in  the 
hands  of  the  Standard  companies  and  practically  all  of  the  remainder 
belongs  to  large  independent  interests.  Though  interstate  pipe- 
lines are  legally  common  carriers,  they  are  used  mainly  by  the  oil 
companies  owning  them  or  affiliated  with  them.  This  intimate  con- 
nection with  pipe-line  transportation  is  an  important  advantage  to 
refineries  in  obtaining  adequate  supplies  of  crude  petroleum  and 
getting  them  at  the  lowest  cost. 

While  the  concentration  of  pipe-line  control  has  placed  the  dis- 
position of  the  crude-oil  production  of  the  countrj^  for  the  most  part 
in  relatively  few  hands,  the  degree  of  integration  attained  may  be 
looked  upon  as  the  inevitable  result  of  the  effort  to  market  ade- 
quately the  accelerating  output  of  crude  petroleum.  With  produc- 
tion highly  individualistic  and  at  all  times  tending  to  outstrip  devel- 
oped demands,  it  devolved  upon  the  manufacturing  and  distributing 
activities  to  facilitate  the  flow  of  the  raw  material  to  the  distributing 
centers  in  proximity  to  demand,  if  full  advantage  was  to  be  taken 
of  the  opportunities  offered.  Accordingly  the  pipe-line  became  part 
of  the  developmental  effort,  rather  than  an  outgrowth  of  the  competi- 
tive, individualistic  efforts  in  the  field  of  production. 

Oil  Tankers. — For  ocean  transport,  the  oil  tanker  represents  the 
most  efficient  agency  for  carrying  petroleum,  and  of  recent  years, 
with  the  development  of  the  oil-fields  of  the  Gulf  Coast  and  Mexico,  a 
growing  number  of  oil  tankers  have  come  into  use.  A  comparison 
of  tanker  tonnage  with  the  total  merchant  tonnage  for  the  world  is 
afforded  in  Table  30. 

Table  30. — Comparison  between  the  Oil-tanker  Tonnage  and  the  Total 
Merchant  Tonnage  of  the  World 


Year 

Tankers 

(In  Thousands  of  Gross 

Tons) 

Total  Steam  TonnageJ 

(In  Thousands  of  Gross 

Tons) 

Tankers 

(In  Percentage  of 

Total) 

1914 
1920 

2325* 
5216* 

45,404 1 
53,905 1 

5.1 
9.7 

*  End  of  year. 


t  June  30. 


I  Lloyd's  Register  of  Shipping 


It  is  thus  apparent  that  the  tanker  tonnage  of  the  world  is  not  only 
nearly  10  per  cent  of  the  total  merchant  tonnage,  but  tanker  con- 

1  Report    on    the   Advance   in    Price   of   Petroleum    Products,    Washington, 
June  1,  1920,  p.  21. 


OIL  TANKERS 


71 


struction  has  been  growing  at  a  much  greater  rate  than  other  types  of 
shipping.  Especially  has  the  building  of  tankers  in  the  United 
States  been  speeded  up  since  1917,  as  indicated  in  Table  31. 

Table  31. — The  Growth  of  Oil-tanker  Tonnage  in  the  United  States  and 
THE  Rest  of  the  World  by  Years,  1913-1921  * 


Year 

Number  of  Tankers 

D.  W. 

Tonnage 

Per  Cent 
Increase 

American 

Foreign 

Total 

1913 
1914 
1915 
1916 
1917 

1918 
1919 
1920 
1921 1 

52 

54 

92 

124 

152 

189 
242 
298 
403 

283 
290 
283 
284 
301 

429 
402 
376 
512 

335 
344 
375 
408 
453 

618 
644 
674 
915 

2,156,987 
2,325,326 
2,538,070 
2,845,414 
3,331,368 

4,699,659 
4,995,122 
5,215,961 
7,554,724 

7 

9 

12 

10 

41 
6 
5 

43 

*  Data  from  The  Lamp,  April,  1921,  p.  5.  These  figures  differ  from  those  reported  in 
Lloyd's  Registry  of  Shipping,  but  are  probably  the  most  accurate  compilation  available. 

t  On  the  assumption  that  the  tonnage  building  the  first  of  the  year  will  be  completed 
during  the  year. 

The  bulk  of  the  international  crude-oil  movement  is  between 
Mexico  and  the  United  States.  In  1920  roughly  180  milhon  barrels 
of  crude  petroleum  were  moved  overseas,  of  which  106  million  barrels, 
or  59  per  cent,  represented  shipments  from  Mexico  to  this  country. 
The  net  carrying  capacity  of  tank-steamers  plying  between  Mexican 
and  American  ports  is  approximately  6  barrels  per  deadweight  ton. 
The  average  tanker  running  between  Mexican  harbors  and  New 
England  or  New  York  is  a  10,000-ton  tanker  or  larger,  with  a  capacity 
of  60,000  barrels  or  more  per  trip;  the  average  tank-steamer  plying 
to  New  Orleans  has  a  tonnage  of  about  8000  tons  and  a  carrying 
capacity  of  about  45,000  barrels;  while  smaller  tankers  of  3000  to 
5000  tons  and  oil  barges  make  the  run  between  Tampico  and  Florida 
and  Texas  ports.^  The  average  number  of  barrels  transported  per 
tank-steamer  trip  has  increased  from  about  28,000  in  January,  1917, 
to  48,000  in  August,  1920,  indicating  that  larger  units  are  being  con- 
stantly put  into  service. 

The  distance  and  average  round-trip  time  for  a  tanker  voyage  from 
Tampico  to  American  and  other  ports  are  shown  in  Table  32. 

1  For  details  regarding  the  Mexican  tanker  situation,  sec  \ .  R.  Garfias, 
Principles  Governing  Mexican  Taxation  of  Petroleum,  Publ.  No.  1054,  American 
Institute  of  Mining  and  Metallurgical  Engineers,  Feb.,  1921. 


72 


THE    TRANSPORTATION    OF    CRUDE    PETROLEUM 


Table  32. — Distance  axd  Time  Required  for  Round  Trip  from  Tampico  to 
Selected  Ports  by  Oil  T.vn'ker,  Average  Speed  10  Miles  per  Hour, 
■mTH  Allowance  for  Days  Lost  in  Repairs,  Dry-docking,  etc. 
(Data  from  V.  R.  Garfias) 


Port 


Distance, 

Time,  Round  Trip 

Miles 

in  Days 

3668 

38 

1951 

24 

2030 

25 

475 

12 

2276 

27 

5518 

54 

2874 

32 

1485 

20 

474 

12 

2131 

26 

473 

12 

473 

12 

Antofagasta,  Chile 

Baltimore,  Md 

Bayonne,  N.J 

Beaumont,  Tex 

Boston,  Mass 

Buenos  Aires,  Argentina 

Callao,  Peru 

Canal  Zone 

Freeport,  Tex 

Fall  River,  Mass 

Galveston,  Tex 

Houston,  Tex 


Before  the  war,  tanker  tonnage  could  be  contracted  for  at  70 
dollars  per  ton.  During  the  war  the  price  reached  200  dollars  a  ton 
and  higher,  but  in  common  with  prices  in  general,  the  price  declined 
to  140  dollars  or  so  bj'  early  1921. 

In  a  10,000-ton  tanker  costing  200  dollars  a  ton,  the  cost  per 
barrel  for  transporting  oil  from  Tampico  would  be  as  follows:  to 
Texas  ports,  42.5  cents;  to  New  Orleans,  53  cents;  to  Florida  ports, 
57  cents;  and  to  New  York,  88  cents.  If  the  tanker  cost  only  100 
dollars  a  ton,  the  transportation  costs  would  become:  to  Texas  ports, 
31.8  cents  per  barrel;  to  Xew  Orleans,  39.6  cents;  to  Florida  ports, 
42.8  cents;  and  to  New  York,  65.9  cents.  Of  the  Mexican  oU 
shipped  to  the  United  States  in  1920,  about  54  per  cent  went  to  New 
York  and  other  North  Atlantic  ports;  26  per  cent  to  Texas  ports; 
and  the  remaining  20  per  cent  to  New  Orleans  and  Florida  ports. 

The  approximate  tonnage  of  tank-steamers  in  operation  and  under 
construction  the  first  of  1921  by  companies  exporting  ^Mexican  oils 
is  shown  in  Fig.  28.  It  is  to  be  noted  that  if  the  construction  program 
as  indicated  in  the  chart  is  completed  the  available  transportation 
will  be  nearly  doubled.  Since  a  ]\Iexican  production  of  163  million 
barrels  in  1920  was  handled  b}'  existing  tonnage,  it  would  appear 
that  unless  Mexican  production  doubles  in  1921,  there  will  be  a 
surplus  of  tanker  transportation  facilities.  Indeed,  tanker  con- 
struction throughout  the  world  has  been  overstimulated,  at  a  period 
of  maximum  costs,  and  a  surplus  of  such  shipping  existed  in  1921  as 


TANK-CARS 


73 


compared  with  the  oil  immediately  to  be  moved.  The  oil-trans- 
porting interests,  in  consequence,  found  themselves  in  somewhat 
the  same  plight  that  befell  the  United  States  Shipping  Board  in  its 
failure  to  coordinate  construction  with  traffic. 


1568  1136 

^^^oPERATiNG  r:;-;:-.;:!  BUILDING 

T0TAL=2704 


STANDARD  OIL  CO.  OF  N.J. 


EAGLE  OIL  &  TRANSPORT 

PAN  AMERICAN  PETR.  &  TRANS. 
STANDARD  OIL  CO.  OF  N.Y. 

SHELL  TRANSPORT  CO. 

TEXAS  CO. 

UNION   OIL   CO.   OF   CALIF. 
SINCLAIR    CONS.    OIL   CORP. 
ATLANTIC    GULF  OIL  CO. 
GULF   REFINING  CO. 


FIGURES   ARE   THOUSANDS  OF    GROSS   TONS 


Fig.  28. — Tank  steainors  in  operation   and  under  construction  by  companies 
exporting  Mexican  oils,  Feb.,  1921;   data  from  V.  R.  Garfias. 

Tank-cars. — Tank-cars  are  mainly  employed  for  the  transpor- 
tation of  petroleum  products,  although  a  small  percentage  of  the 
crude  petroleum  supply  is  handled  in  this  manner.^  Tank-cars  of 
some  kind  have  been  in  use  in  the  petroleum  industry  for  over  fifty 
years.      At  the  outset  they  were  tub-cars,  consisting  of  a  wooden 

'  For  an  account  of  the  development  of  tank-cars,  see  Max  Epstein,  Tank-cars, 
American  Petroleum  Institute,  Nov.  17,  1920. 


74 


THE    TRANSPORTATION    OP   CRUDE    PETROLEUM 


vat  or  set  of  vats  on  a  flat  car.  Soon  it  became  necessary  to  devise 
more  efficient  units,  and  the  forerunner  of  the  modern  tank-car  was 
developed,  consisting  of  a  steel  cyHnder  strapped  to  a  flat  car.  There 
were  virtually  no  standards  or  rules  of  construction  until  1903,  when 
the  Master  Car  Builders'  Association  adopted  designs  and  specifica- 
tions for  tank-car  construction.  The  modern  tank-car  is  now  "  the 
strongest,  most  durable,  most  carefully  built  freight  car  in  the  train." 

Originally  the  tank-car  was  developed  for  carrying  crude  petro- 
leum from  the  wells  to  the  refinery,  the  refined  products  being  shipped 
in  barrels.  The  pipe-line,  however,  has  modernly  come  to  care  for 
the  transportation  of  a  growing  proportion  of  the  crude  petroleum, 
while  the  mounting  volume  of  petroleum  products  to  be  moved 
has  called  for  increasing  numbers  of  tank-cars  for  this  purpose.  Of 
recent  years  tank-cars  have  been  employed  mainly  for  carrying  loads 
from  the  refinery,  and  onlj'  in  minor  degree  as  a  feeder  to  the  plant. 
But  as  the  search  for  new  production  proceeds  and  new  or  tem- 
porary fields  are  brought  in,  the  tank-car  reassumes  its  original 
function  and  handles  the  crude  from  fields  not  yet  developed  to  the 
degree  where  pipe-lines  may  be  profitably  constructed. 

The  number  of  oil  tank-cars  in  operation  in  the  United  States  is 
not  definitely  known,  but  the  approximate  number  of  tank-cars  of 
all  kinds  in  use  in  this  country  and  Canada  is  shown  in  the  following 
tabulation. 


Table  33. 


-Number  of  Tank-cars  in  the  United  States  and  Canada  on 
January  1,  1914-1921* 


1914 

49,901 

1915 

50,899 

1916 

56,752 

1917 

67,817 

1918 

83,918 

1919 

98,657 

1920 

110,534 

1921 

137,493 

*  Data  from  The  Lamp,  April,  1921,  p.  6. 

The  majority  of  the  tank-cars  in  use  are  owned  by  oil  companies, 
or  by  separate  tank-car  corporations,  a  small  proportion  only  being 
controlled  by  the  railroads  themselves.  The  Interstate  Commerce 
Commission  has  reported  that  on  Jan.  1,  1918,  there  were  67,000 
privately  owned  and  11,277  railroad-owned  tank-cars  in  service, 
these  figures  including  cars  used  for  the  transportation  of  other 
liquid  products  as  well  as  petroleum  oils.^ 

1  Case  No.  4906,  In  the  Matter  of  Private  Cars,  Interstate  Commerce  Com- 
mission, April  1,  1918. 


CHAPTER  VI 


TREND  OF  REFINERY  PRACTICE 


The  petroleum  industry  turns  out  a  wide  range  of  commodities 
under  a  confusing  and  perplexing  multiplicity  of  names.  The 
products  of  major  importance,  however,  are  four  in  number,  and  the 
matter  may  be  simplified  by  viewing  the  composite  output  as  shown 
in  Table  34. 

Table  34. — Generalized  View  of  the  Most  Important  Petroleum  Products 


Major  Products 

Principal  Varieties 

Gasoline 

Aviation  gasoline 
Motor  gasoline 
Benzine 

Naphtha 

Kerosene 

Water-white 
Standard-white 
Mineral  seal 
Distillate 

Fuel  oil 

Gas  oil 
Residual  fuel  oil 

Lubricating  oils 

Neutral  oils 
Cylinder  stocks 
Paraffin  oils 

Primary  by-products 

Paraffin  wax 
Asphalt 
Road  oil 
Petroleum  coke 

Secondary  by->^roducts 
(fabricated) 

Greases 
Petrolatum 
Medicinal  oils, 
etc. 

The  refining  of  crude  petroleum  involves  the  principle  of  joint- 
production — the  manufacture  of  a  given  product  necessitating  the 


76  TREND  OF  REFINERY  PRACTICE 

output  of  other  products — and  this  fundamental  characteristic  of  oil 
refining,  in  view  of  the  varied  types  of  crude  petroleum,  the  circum- 
stances attending  their  exploitation,  and  the  rapidly  shifting  char- 
acter of  the  demands  for  petroleum  products,  has  led  to  wide  local 
variations  in  refinery  technolog\'  in  the  attempt  to  fit  the  supply  to 
the  requirements  of  the  country.  The  basic  principles  underlying 
the  refining  of  petroleum  have  changed  very  little  since  the  early 
days  of  this  industry,  but  the  degree  to  which  these  principles  have 
been  applied  has  shown  a  constant  evolution  from  partial  to  full 
application  as  each  field  of  operations  has  matured.  Thus  refineries 
vsLiy  from  small,  rude  plants,  which  merely  skim  off  the  lighter  com- 
ponents, gasoline  and  kerosene,  selling  the  residuum  as  fuel  oil,  to 
large,  chemically  controlled  manufactories  that  turn  out  the  whole 
range  of  products  obtainable  in  the  present  state  of  the  art. 

Methods  of  Refining. — Crude  petroleum  is  manufactured  into 
petroleum  products  by  a  process  of  distillation,  by  means  of  which 
successive  components  are  vaporized  and  separately  condensed,  the 
resultant  distillates  being  then  redistilled  or  chemically  purified  to 
yield  the  finished  products  entering  into  commerce.  Certain  of  the 
compounds,  which  decompose  at  temperatures  of  vaporization,  are 
removed  as  residual  bodies,  instead  of  as  distillates. 

There  are  two  fundamental  types  of  distillation  in  general  use: 
(a)  dry  distillation,  in  which  heat  is  applied  directh^  to  the  still  by 
coal,  gas,  or  oil  fires  alone,  and  (6)  steam  distillation,  in  which  fire  is 
applied  to  the  still  but  superheated  steam  is  continuously  bubbled 
through  the  boiling  oil.^ 

Dry,  or  destructive,  distillation  is  the  simpler  and  cheaper  method, 
and  is  widely  employed  in  new  developments  and  on  cheap  oil.  Its 
use  ordinarily  involves  some  degree  of  decomposition  of  the  heavier 
components  of  the  oil,  and  the  viscous  or  lubricating  compounds  are 
impaired  in  quantity  and  quality.  Dry  distillation  is  employed 
where  the  maximum  yield  of  bulk  products — gasoline,  kerosene, 
fuel  oil — is  desired. 

Steam  distillation  is  the  more  involved  and  expensive  method, 
and  is  employed  by  most  of  the  older  refineries,  where  the  focus  is 
upon  a  full  extraction  of  values  and  especially  upon  the  manufacture 
of  lubricating  oils.  Its  use  protects  the  components  of  the  crude  oil 
from  undue  decomposition  during  the  course  of  distillation,  as  the 
steam  has  the  effect  of  lowering  the  boiling  points  of  the  hydro- 
carbons. 

*  A  good  technical  description  of  oil  refining  is  given  by  C.  W.  Stratford, 
Petroleum  Refining,  Journal  of  the  Society  of  Automotive  Engineers,  July,  1918, 
pp.  69-87. 


SKIMMING   PLANTS 


77 


With  two  basic  methods  of  refining,  three  groups  of  crude  petro- 
leums (paraffin-base,  mixed-base,  and  asphalt-base),  and  a  varied 
economic  setting  in  respect  to  the  products  that  may  profitably  be 
disposed  of,  a  great  many  different  types  of  refineries  have  developed. 
It  is  impossible  to  make  a  rigorously  logical  classification  of  refinery 
types,  but  in  a  general  way  oil  refineries  group  themselves  as  follows: 


Table  35. — Impoktant  Types  of  Refineries 


Method  of 

Name 

Distillation 

Kind  of  Crude 

Economic  Focus 

1 .  Skimming  plant .  .  . 

Dry 

Mixed  and  paraffin-base 

Light  products  (gas- 
oline andkerosene) 

2.  Intermediate  plant 

Dry 

Mixed-base 

Light  products;  some 
lubricants 

3.  Complete  plant.. .  . 

Steam 

Paraffin-base 

Lubricants;  light 
products 

4.  Complete  plant.. .  . 

Steam 

Mixed-base 

Lubricants;  light 
products 

5.  Complete  plant. . .  . 

Steam 

Asphalt-base 

Lubricants;   light 
products 

6.  Topping  plant 

Dry 

Asphalt-base 

Fuel  oil                       1 

i 
1 

The  characteristic  yields  of  the  six  major  refinery  types  are  shown 
graphically  in  Fig.  29.  The  methods  of  manufacture  followed  in 
each  case  are  different;  and  brief  descriptions,  emphasizing  the 
economic  characteristics,  are  given  below. 

Skimming  Plants.' — Skimming  plants,  as  the  name  miplies, 
remove  only  the  lighter  fractions  from  the  crude  petroleum,  and  are 
not  concerned  with  the  manufacture  of  products  from  the  heavy 
residues,  which  are  Imnped  together  and  sold  as  fuel  oil.  (See  Fig.  29a.) 
The  skimming  plant  is  the  simplest  and  cheapest  type  of  refinery 
and  makes  merely  a  rough  separation  of  the  raw  material  into  a  few 
products  in  ready  demand.  Around  40  per  cent  of  the  refinery 
capacity  of  the  United  States  is  of  the  skimming  type,  the  bulk  of 
the  installations  being  in  the  Mid-Continent  region  in  proximity  to 
producing  fields  yielding  oils  rich  in  gasoline. 

Skimming  plants  produce  a  notable  proportion  of  the  country's 
gasoline  supply,  but  are  wasteful  of  the  lubricating  values  contained 
in  the  oil.  They  are  very  profital)le  where  accessible  to  cheap  oil, 
but  quickly  become  uneconomic  when  adjacent  fields  decline  in 

*  Refinery  types  are  discussed  by  H.  H  Hill,  Kefinory  Problems,  U.S.  Bureau 
of  Mines,  1920. 


78 


TREND  OF  REFINERY  PRACTICE 


OQCOo'^C'-'^^^'-'OOO^jCo'^'-)  ^^^^^^ 


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o 

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c, 

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o 

O 

o 

f=3 


INTERMEDIATE   REFINERIES 


79 


output  or  when  the  price  ratio  becomes  unfavorable  to  this  type  of 
plant.  The  skimming  plant  is  an  accompaniment  of  flush  produc- 
tion, springing  up  quickly  and  as  quickly  becoming  dormant  as  cir- 
cumstances shift.  In  many  instances,  sldnuiiing  plants  are  changed 
into  intermediate  plants  (Type  2,  Table  35,  and  Fig.  296)  bj^  the 
addition  of  re-run  stills  and  equipment  for  the  removal  of  wax  and 
the  treatment  of  the  heavier  distillates,  thus  evolving  into  refineries 
capable  of  manufacturing  lubricating  oils. 

Intermediate  Refineries. — Refineries  employing  drj^  distillation, 
operating  mainly  on  mixed-base  crudes,  and  focusing  upon  light 
products,  with  incidental  attention  to  the  manufacture  of  lubricating 
oils,  though  usually  called  complete  refineries,  may  be  appropriately 
termed  intermediate  refineries.     The  yield  of  a  typical  plant  of  this 


Fig.  30. — Sketch  of  a  tjiiical  small  skimming  plant  in  the  Mid-Continent  Field, 
after  R.  W.  Cunningham. 

type  operating  on  Mid-Continent  crude  is  shown  in  Fig.  296.  As  the 
term  intermediate  implies,  plants  of  this  type  are  one  stage  removed 
from  skimming  plants,  but  they  do  not  take  full  advantage  of  the 
viscous  components  of  the  crude;  the}^  extract  these  but  partially 
and  in  the  form  of  so-called  paraffin  lubricating  oils,  with  yields 
smaller  in  volume  and  inferior  in  worth  to  the  lubricating  oils  obtain- 
able from  the  same  crude  in  complete  refineries  employing  steam  dis- 
tillation. 

Complete  Refineries. — Complete  refineries  are  those  making 
relatively  a  full  extraction  of  values  by  the  method  of  steam  distilla- 
tion. The  details  of  a  complete  refinery  differ  according  to  the  type 
of  crude  employed;  and  in  general  these  differences  are  such  that 
complete  refineries  may  be  subdivided  into  three  varieties:  (1)  those 
handling  Pennsylvania,  or  paraffin-base  crudes,  (2)  those  employ- 
ing Mid-Continent,  or  mixed-base  crudes,  and  (3)  those  running 
GuK  Coast,  or  asphalt-base  crudes. 


80 


TREND  OF  REFINERY  PRACTICE 


a; 


b  o 

0)  -s; 


The  Pennsylvania 
type  of   complete  re- 
finery   is     the     most 
mature  and  the   best 
known.   (See  Fig.  29c.) 
Its    refinery   practice 
is    dictated    by     the 
focus  upon  obtaining 
the  maximum  yield  of 
lubricating  oils,  especi- 
ally the  viscous  variety 
known     as      cylinder 
stock.      Because    the 
lighter     products     of 
paraffin-base      crudes 
are     readily    distilled 
off,  while  the  compo- 
nents of  the  cylinder 
stock  decompose  upon 
vaporization,  the  lat- 
ter is  recovered  as   a 
heavy      residual      oil 
which  yields   finished 
cyUnder   stock     upon 
subsequent  treatment. 
The  distillation  can  be 
conducted  in  this  man- 
ner because  the  crude 
petroleum  contains  no 
asphaltic     material 
which  would    be   left 
behind  as  a  contami- 
nation in  the  residual 
cylinder  stock.      The 
characteristic  practice 
in    s  t  e  a  m-r  e  fi  n  i  n  g 
Pennsylvania  crude  oil 
is  shown  diagrammati- 
cally  in  Figs.  31   and 
32. 

With  mixed-base 
petroleum,  such  as 
much  of  that  produced 


COMPLETE   REFINERIES 


81 


in  the  Mid-Continent  field,  the  complete  refinery  is  forced  to  vary  its 
practice  in  order  to  remove  the  asphaltic  content  at  a  relatively  early 
stage  in  the  distillation  process  and  thus  prevent  its  accumulation 


<  m  o 


along  with  the  residual  cylinder  stock  at  the  end.  (See  Fig.  29d.) 
This  is  accomplished,  after  the  gasoline  has  been  distilled  off,  by 
treating  the  oil  with  sulphuric  acid,  which  precipitates  the  heavy 
asphaltic  bodies  in  the  form  of  an  acid  sludge;  the  remaining  oil  is 


82  TREND  OF  REFINERY  PRACTICE 

then  subjected  to  further  distillation,  cylinder  stock  being  left  as  a 
final  residual  product. 

With  asphaltic  crudes,  such  as  those  of  the  Gulf  Coast,  the  com- 
plete refinery  may  still  further  varj^  its  practice,  and  in  the  direction 
of  simplification,  since  in  crudes  of  this  type  the  entire  lubricating 
content  may  be  distilled  off  (because  their  boihng  points  are  lower 
than  the  lubricating  components  of  corresponding  viscosity  in 
paraffin-base  crudes).  Thus  the  asphaltic  content  offers  no  par- 
ticular difficulty,  since  it  may  be  left  to  constitute  the  residuum,  the 
lubricating  oils  having  passed  off  as  distillates.  Refineries  of  this 
type  have  enjoyed  a  notable  development  in  the  past  few  years  in 
the  Gulf  Coast  region,  and  have  opened  to  full  utilization  a  type  of 
crude  employed  mainly  heretofore  in  the  manufacture  of  fuel 
oil. 

Topping  Plants. — A  variant  of  the  skimming  plant,  used  for 
heavy  crudes  such  as  those  of  California  and  Mexico  which  con- 
tain small  percentages  of  light  components,  is  the  so-called  topping 
plant.  This  type  of  refinery  is  concerned  primarily  with  the  pro- 
duction of  fuel  oil,  removing  from  the  crude  oil  the  volatile  com- 
ponents which,  if  left  in  the  fuel  oil,  would  render  it  unsafe  for  gen- 
eral use.  These  light  liquids  are  called  tops  and  distillates  and  cor- 
respond roughly  to  the  gasoline,  naphtha,  and  kerosene  of  skimming 
plants.  The  difference  between  a  topping  and  skimming  plant  is 
primarily  one  of  economic  focus,  arising  from  the  type  of  crude  oil 
available;  both  are  immature,  effecting  merely  a  rough  separation  of 
values. 

Topping  plants  are  numerous  in  California,  and  of  late  a  large 
capacity  has  been  installed  along  the  Atlantic  Seaboard  to  handle  the 
quantities  of  Mexican  oil  coming  into  this  country.  The  yield  of  a 
typical  topping  plant  is  shown  in  Fig.  29/. 

Refineries  with  Cracking  Plants.^In  many  refineries  are  sup- 
plementary batteries  of  pressure  stills  employed  in  converting  gas 
oil  partly  into  gasoline  under  the  application  of  high  temperature 
and  pressure.  Most  of  the  installations  of  this  kind  are  attached 
to  the  larger  complete  refineries.  The  raw  material  and  typical  yield 
of  the  process  is  shown  in  Fig.  33.  Cracking  installations  have 
developed  and  expanded  in  response  to  a  demand  for  gasoline  that 
is  outdistancing  the  ability  of  normal  refining,  thus  calling  into  play 
an  enforced  yield  in  addition  to  that  ordinarily  obtainable.  In  1920 
perhaps  as  much  as  a  tenth  of  the  country's  entire  supply  of  gasoline 
was  made  in  pressure  stills  from  gas  oil. 

The  growth  of  cracking  has  created  a  number  of  problems  of  the 
first  importance  which  are  treated  in  detail  in  subsequent  chapters. 


TREND  OF   REFINERY   TYPES 


83 


Trend  of  Refinery  Types. — It  is  evident  from  this  brief  analysis 
of  the  refinery  situation  that  there  are  four  stages  in  the  evolution  of 
refinery  practice,  through  which  the  refineries  of  the  country  are  in 
general  passing.  At  the  outset  of  new  developments,  with  cheap 
and  abundant  crude  petroleum,  skimming  and  topping  plants 
develop  according  to  the  type  of  crude ;  then,  with  advancing  condi- 
tions, these  incomplete  plants  either  fail  or  else  change  into  inter- 
mediate refineries  that  effect  a  fuller  extraction  of  values;  later, 
with  increasing  stress,  the  growth 
is  in  the  direction  of  complete  re- 
fineries, in  which  fuller  advantage 
is  taken  of  the  potentialities  present 
in  the  crude  oil ;  and  finally  pressure 
stills  are  installed  to  carry  the 
extraction  of  values  still  further  by 
converting  a  low- value  product  into 
one  of  greater  worth.  While  this 
evolutionary  trend  is  not  entirely 
sharply  defined,  and  local  compli- 
cations are  present,  it  is  practically 
certain  that  ultimately  the  complete 
plant  with  cracking  installations  will 
quantitatively  dominate  the  situa- 
tion, just  as  this  type  of  plant  now 
leads  in  economic  and  financial 
strength. 

Trend  of  Refinery  Output.— The 
trend  in  output  of  the  principal 
petroleum  products  in  the  United 
States  over  the  period  for  which 
figures  are  available  is  shown  in 
Table  36  and  Fig.  34.  Fig.  34  is  a 
ratio  chart   in  which  the  slopes  of 

the  curves  are  proportional  to  the  percentage  changes;  it  may 
be  observed  that  the  production  of  gasoline  and  fuel  oil  has 
been  increasing  at  a  notable  rate,  and  one  in  excess  of  the 
increase  in  output  of  crude  petroleum.  The  production  of  lubri- 
cating oils  and  kerosene,  on  the  other  hand,  has  been  increasing 
less  strikingly  and  at  a  much  slower  rate  than  crude  petroleum. 
With  due  allowance  for  imported  crudes,  there  is  evidently  a  shift 
taking  place  in  the  proportionating  of  the  output  in  favor  of  gasoline 
and  fuel  oil.  This  arises  of  course  from  the  mounting  requirements 
of  automotive  transportation,  which  have  sent  the  demand  for  gaso- 


•  ••     •     •   •     * 

.V.v.v.*.;::::::::::;'.'.".; 

-  •    •         •  • 

•  •      .  •    • 

•  •     *      •      • 

*           •    • 

•  •  .    •  •  • 

•     ,   •  •  •  • 

.  .  •  ,  .    .  • 

:;;;:.;.;. 

rV-.yqASOLj'N.E.;-':^^^^^^ 

•       *     •      •    • 

'■■■■■"■  '^^V.".  ■'■■■■■;."•;.': 

•  •    •   •     • 

■.'•/*• 

•                 •       • 

*      •       * 

•                  •          •    ,* 

•           •         •  • 

••...;• 

•  .         • 

•      • 

1   * .   .    .  •  •, 

•  •  •  ,  •  •  • 

1^  GAS  OIL  ;,* 

••••*..• 

!•...•• 

^ 

• .  •     • 

•   •  • 

•    .    .        •  •  • 

•            • 

•         •  •  • 

•        •    • 

•    •      *      • 

•    *               •    • 

•      • 

,   FUEL   OIU    • 

•         61%      .     • 

*   •    •              • 

•    ,  .  •  •   • 

•  •  •         •    *     •   • 

•..•.••- 

•     .        •             • 

.';.:•/.:;';: 

*  .*.  •'•*  •  •.* 

•.••.-.•• 

•  .*.  •.'.•  • 

-.••.•.•. 

/...•.  . 

•*.*•••• 

••    ••• 

•  •  .  •  /  • . 

~     LOSS   .5*^ 

Fig.  33. — Chart  showing  typical  prac- 
tice in  manufacturing  cracked  gaso- 
Une. 


84 


TREND  OF  REFINERY   PRACTICE 


MILLION^  OF 

BARRELS 

600 


lOO 
90 
80 
70 
60 


/ 

/ 

^ 

f 

CRUDE 

PETROLEUM-^^ 

^ 

y 

/ 

^ 

X 

•     GAS   &    FUEL 

OIL-^ 

/ 

/ 

1 

y 

y 

y 

1 

i 

r 

/ 

,^ 

^ 

X                 GA 

50LINE 

/ 

/ 

— 

/ 

, ^--"' 

"-/ 

/' 

/ 

KEROSENE       I    ^^^^^'      / 

A. 

,^' 

/ 

1^ 

/ 
/ 
/ 

/ 

1 

/                      L 

UBR.   O 

ILS 

■V 

•' 

• 

/                   f^ 

'- 

/           "^ 

^^  ,^y 

y 

• 
y 
y 

SCALE 

INCREASE 

DECREASE 

+ioo^ 

+  80«« 

+  60;^ 

+  40f 
+  20^ 

O^ 

-  10^ 

-  20j6 

-  30* 


1914         1916 


Fig.  34. — Trend  in  output  of  crude  petroleum  and  it.s  prinoipal  products  in  the 
United  States,  1899-1920. 


PRODUCTION   OF   PETROLEUM   PRODUCTS 


85 


line  insistently  forwavcl,  supported  by  the  vigorous  development 
of  the  oil-fields  of  this  countiy  and  Mexico.  The  production  of 
kerosene  and  lubricating  oils  has  followed  along  to  the  capacity 
of  their  respective  demands,  much  of  the  potential  lubricants  hav- 
ing of  necessity  to  be  marketed  in  the  form  of  fuel  oil. 

Production  of  Petroleum  Products  in  Recent  Years. — The  output 
of  the  principal  petroleum  products  by  years  from  1917-1920  is 
shown  both  statistically  and  graphically  in  Fig.  35.  It  is  to  be  observed 
that  enormous  volumes  of  these  materials  are  manufactured  and  a 
notable  advance  in  output  has  recently  taken  place.  The  change 
in  the  relative  importance  of  the  products  is  shown  in  the  percentage 
comparison  in  the  right-hand  half  of  the  chart.  The  increase  in  the 
relative  output  of  gasoline  is  especially  noticeable. 


Table  36. — Production    of    the  Principal  Petroleum    Products    in    the 
United  States,  1899-1920 


Gasoline           j          Kerosene 

■ 

i 
G.\s  .\ND  Fuel  Oil      Lubric.\ting  Oils  | 

Year 

Prod. 
Mill. 
Gals. 

Index 

Nos. 

Yearly 
Change 

Prod. 
Mill. 
Gals. 

Index 

Nos. 

Yearly 
Change 

Prod. 
Mill. 
Gals. 

Index 

Nos. 

Yearly 
Change 

Prod. 

Mill. 
Gals. 

Index 

Nos. 

Yearly 
Change 

1899* 
1904* 
1909* 
1914* 

1916t 
1917t 
1918t 
1919t 
1920t 

281 

291 

540 

1500 

2059 
2851 
3570 
3958 
4883 

18 

19 

36 

100 

137 
190 
2.38 
264 
325 

+  38%: 

+  25% 
+  10% 
+  23% 

1259 
1357 
1675 
1935 

1455 
1727 
1825 
2342 
2320 

65 

70 

85 

100 

75 

89 

94 

121 

120 

+  19% 
+   6% 
+  28% 
-    1% 

305 

360 

1702 

3734 

4664 
6513 
7321 
7627 
8861 

8 

10 

46 

100 

125 

174 
196 
204 
238 

+40% 
+  13% 
+  4% 
+  16% 

170 
315 
537 
517 

624 
754 
841 
847 
1048 

33 

61 

103 

100 

121 
146 
162 
164 
203 

+21% 
+  11%: 

+       1%: 

+  24% 

*  Census  of  Manufactures. 


t  U.  S.  Bureau  of  Mines. 


Source  of  Petroleum  Products, — The  proportions  of  the  principal 
petroleum  products  manufactured  in  various  parts  of  the  country 
are  shown  in  Table  37,  the  outputs  of  each  product  being  grouped 
according  to  refinery  districts. 

The  data  presented  in  Table  37  are  graphically  interpreted  in  Fig. 
36,  in  which  the  relative  contril>ution  of  each  product  made  by  various 
parts  of  the  country  may  be  conveniently  viewed. 

Relation  of  Refining  Costs  to  Crude  Costs.— In  the  refining  of 
petroleum,  the  cost  of  the  crude  oil  is  the  largest  factor,  in  many 
instances  running  up  to  70-80  per  cent  of  the  total  costs.  Data  for 
1917  for  a  number  of  refineries  are  shown  in  Table  38  as  indicative  of 
the  situation: 


86 


TREND  OF  REFINERY  PRACTICE 


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o 

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o 
o 

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RELATION    OF    REFINING    COSTS    TO    CRUDE    COSTS       87 


Table  37. — Output  op  the  Principal  Petroleum  Products  in  the  United 
States  in  1920  by  Refinery  Districts 


Refinery  District 

Gasoline, 
Per  Cent 

Kerosene, 
Per  Cent 

Gas  and 
Fuel  Oil, 
Per  Cent 

Lubricating 

Oils, 

Per  Cent 

Others, 
Per  Cent 

East  Coast 

Penn.,  etc 

Ill.-Ind.,  etc 

Kan.-Okla.,  etc.. . 

Tex.-La 

Wyo.-Colo.,  etc... 
Calif 

19.9 

5.9 
14.4 
20.0 

23.4 

6.2 

10.2 

21.4 
7.5 
9.4 

17.0 

30.8 
5.0 

8.9 

21.9 

2.3 

6.4 

15.1 

27.0 

2.4 

24.9 

31.5 

18.2 

12.1 

8.7 

19.3 
1.4 

8.8 

14.0 

3.4 

13.7 

6.4 

28.0 
15.3 
19.2 

Total 

100.0 

100.0 

100.0 

100.0 

100.0 

Table  38. — Relation  of  Operating  Costs  to  Crude  Costs  in  a  Number  of 
American  Refineries  in  1917 

Data  from  Oil  Division,  U.  S.  Fuel  Administration. 


Refinery 

Location 

Cost  of  Crude, 
Per  Cent 

Operating  Costs, 
Per  Cent 

Total, 
Per  Cent 

No.  1 
No.  2 
No.  3 

No.  4 

No.  5 

No.  6 

No.  7 

East 

East 

East 

Middle  West 

Middle  West 

Oklahoma 

Texas 

78 
79 
70 
80 

84 
87 
80 

22 
21 

30 
20 

IG 
13 

20 

100 
100 

100 
100 

100 
100 
100 

Table  39. — Relation  of  Crude  Cost  to  Refining  Costs  in  California  in 
1914  AND  1919,  Based  on  Data  for  15  Refineries 

(In  Per  Cent) 


Item 

General  and  administrative  expense,  and  depreciation 

Refinery  operating  expense 

Delivered  cost  of  crude 

Total 


1914 


1919 


7.1 
13.5 

79.4 


100,0 


8.3 
17.7 
74.0 


100.0 


TREND  OF  REFINERY  PRACTICE 


The  relation  of  the  cost  of  raw  material  to  refining  cost  is  shown 
for  California  in  Table  39  from  figures  compiled  by  the  Federal 
Trade  Commission  ^  for  15  refineries  representing  a  total  investment 
of  47  million  dollars  out  of  a  total  for  the  state  of  50  million  dollars. 


^KEROSENE 


VgAS  &   FUEL  OIL 


LUBRICATING   OILS 


.ALL   OTHERS 


40      50     60     70      SO     90    lOO^ 


Fig.  36. — The  output  of  petroleum  products  in  the  United  States  in  1920  by 

refinen'  districts. 

Relation  of  Labor  Costs  to  Refinery  Output. — The  ratio  of  man- 
power to  the  volume  of  materials  handled  in  oil  refining  is  small,  as 
compared  with  the  run  of  manufacturing  operations.  An  indication 
of  this  relationship  is  shown  in  Table  40. 

1  Summary  of  Report  on  the  Pacific  Coast  Petroleum  Industry,  April  7,  1921, 
p.  13. 


RANK  OF  PETROLEUM  PRODUCTS 


89 


Table  40. — Relation  of  Man-power  to  M.\terl\ls  Handled  in  American 
Petroleum  Refineries  during  First  Seven  Months  of  1918 

(Data  from  U.  S.  Fuel  Administration) 


Number  of 
Refineries 

Location 

Average  Number  of 

Barrels  Run  DaUy 

per  Man 

Average  Wages  per 
Barrel  Run,  Cents 

6 
33 

7 
6 

5 
38 

2 
12 

109 

East  Coast 

9.37 
10.04 

9.80 
74.00 

31.10 
27.00 
42.40 
31.80 

17.57 

46 

37 

44 

5 

13 
15 
14 
14 

24 

Eastern 

Illinois  and  St.  Louis 

Northern  Texas 

Gulf 

Oklahoma 

Rocky  Mountain 

Pacific  Coast 

Country 

Rank  of  Petroleum  Products. — The  relative  importance  to  the  oil 
refiner  of  the  products  manufactured  from  crude  petroleimi  is  indi- 
cated in  Table  41,  which  shows  the  average  returns  per  barrel  of  crude 
petroleum  refined  in  1918. 


Table  41. — Estimated  Average  Returns  per  Barrel  of  Crude  Petroleum 

Refined  in  1918 

(Data  from  Bureau  of  Engineering,  Oil  Division,  U.  S.  Fiiel  Administration) 


Rank 

Product 

Dollars 

Per  Cent  of  Total 

1. 

2. 
3. 
4. 
5. 
6. 
7. 

Gasoline 

Gas  and  fuel  oil 

1.922 
1.213 
.419 
.378 
.121 
.042 
.0069 
.210 

44.5 
28.2 
9.7 
8.8 
2.8 
0.95 
0.15 
4.9 

Lubricating  oils 

Kerosene 

Wax 

Asphalt 

Coke 

All  others 

Total 

4.31 

100.0 

It  is  apparent  from  this  table  that  gasoline  represented  nearly 
half  of  the  income  to  the  average  refinery  in  1918 — to  such  an  extent 
has  the  oil  industry  become  involved  in  the  field  of  automotive  trans- 
portation. 


CHAPTER   VII 
ANALYSIS  OF  REFINERY  CAPACITY 

There  are  approximately  500  petroleum  refineries  in  the  United 
States  ranging  in  size  from  plants  capable  of  running  500  barrels  of 
petroleum  daily  or  even  less  to  large  manufactories  equipped  for 
handling  upwards  of  40,000  barrels  each  day.  These  plants  in  the 
aggregate  represent  a  refining  capacity  in  excess  of  the  crude  petro- 
leum available  as  well  as  in  excess  of  requirements  for  refined  products; 
a  large  proportion  of  the  plants  are  grouped  about  the  oil-fields  at  a 
distance  from  the  markets;  and  many  turn  out  a  very  limited  range 
ot  products  with  a  sacrifice  of  values.  The  oil-refining  industry 
as  a  whole  has  grown  somewhat  out  of  adjustment  to  supply,  demand, 
markets  and  other  factors  to  which  it  is  geared,  and  a  considerable 
readjustment  in  the  structure  of  this  portion  of  the  petroleum  industry 
is  taking  place  and  lies  ahead.  In  view  of  this  circumstance,  it  is 
important  to  analyze  the  location,  size,  type  and  degree  of  utilization 
of  the  country's  refinery  capacity,  with  a  view  to  determining  the 
stability  attained  and  the  extent  of  the  changes  in  prospect. 

Location  of  Refinery  Capacity. — In  spite  of  the  development  of  an 
extensive  pipe-hne  system  for  transporting  crude  petroleum  to  the 
consuming  centers  for  manufacture  there  into  petroleum  products,  a 
large  share  of  the  refiner}^  capacity  of  the  country  is  in  those  states 
producing  petroleum  in  great  quantities,  such  as  Texas,  California, 
Oklahoma,  Pennsylvania,  Louisiana,  Kansas,  and  Wyoming.  The 
degree  to  which  refining  is  centered  in  the  oil-producing  states  is 
graphically  shown  in  Fig.  37,  where  New  Jersey  stands  out  as  the 
marked  exception  to  this  rule. 

The  number,  size  and  location  of  refineries  are  given  in  greater 
detail  in  Table  42,  where  figures  for  a  number  of  years  permit  a  view  to 
be  had  of  the  location  of  new  developments.  It  will  be  observed  that 
points  along  the  East  Coast,  and  the  states  recently  coming  into 
prominence  as  oil  producers  (Texas,  Louisiana,  and  Wyoming), 
show  the  most  marked  growth  in  refinery  installations. 

Size  of  Refineries. — The  average  capacity  of  the  refineries  of  the 
country  is  approximately  4500  barrels  a  day.     The  largest  refineries, 

90 


LOCATION   OF   REFINERY   CAPACITY 


91 


as  readily  apparent  from  Table  42,  are  in  New  Jersey,  with  an  average 
capacity  of  27,000  barrels  daily;  the  largest  of  the  New  Jersey  plants 
is  at  Bayonne,  with  a  daily  capacity  of  40,000  barrels.  To  indicate 
in  further  detail  the  range  of  refinery  capacities  in  the  various  parts 
of  the  country,  recent  refinery  statistics  have  been  first  grouped  into 


TEXAS 

CALIF. 

OKLA. 

N.J. 

PENN. 

LA. 

KAN. 

WYO. 

ILL. 

IND. 

MD. 

OHIO 

N.  Y. 

MO. 

MASS. 

R.I. 

S.  C. 

KY. 

W.  VA. 

GA. 

UTAH 

NEB. 

COLO. 

MINN. 

ARK. 

TENN. 


DAILY   CAPACITY   IN   THOUSANDS   OF   BARRELS 
lOO  150  200         250         300  350         400  450 


[OPERATING 


Fig.  37. — Refinery  capacity  of  the  United  States  in  Oct.,  1920,  by  states;   data 

from  Oil  Weekly. 


the  six  refinery  districts  estabhshed  by  the  U.  S.  Bureau  of  Mines 
in  reporting  refinery  output  and  then  classified  into  five  groups 
according  to  size.  The  results  are  shown  in  Table  43  and  graphically 
interpreted  in  Fig.  38.  The  dominance  of  refineries  above  10,000 
barrels  daily  input  is  at  once  apparent,  while  the  relatively  exten- 
sive installations  of  rofineri(>s  running  5000  barrels  and  under  in  the 
Kansas-Oldahoma  and  Texas-Louisiana  regions  are  equally  striking. 


92 


ANALYSIS  OF  REFINERY  CAPACITY 


The  overwhelming  preponderance  of  refinery  capacity  in  the  south- 
central  states  and  near  the  Atlantic  and  Pacific  seaboards  is  no  less 
notable.     Fig.  38  will  bear  careful  comparison  with  Fig.  2  showing 


Table  42. — Growth  of  the  Refinery  Capacity  of  the  United  States  by 

States,  1918-1921 

(Data  from  U.  S.  Bureau  of  Mines) 


States 


Texas 22 

California.:     38 


Number  of  Refineries, 

J.\N.   1 


1918 


1919 


Oklahoma 
New  .Jersey 
Louisiana. 


Penn 

Kansas.  .  . 
WyoniinK- 
Illinois.  .  . 
Indiana. .  . 


Maryland. 
Xrw  York 

Mass 

Ohio 

Missouri.  . 

Kentucky. 

R.  I 

W.  Va.... 
VirKinia. .  . 
Geoigia.. . 


04 


10 


26 

37 

79 

4 

12 

48 
31 

.") 
11 

2 

4 

7 


1920 


64 

41 

87 

7 

13 

56 
33 
10 
14 
3 


I 

jBuild- 
1921  I    ing 
Jan.], 
1921 


Daily  Capacity  of  Refineries, 

Jan.  1 

(In  Thousands  of  Barrels) 


1918       1919 


4  4 

7  7 

3 

12 


Utah 1 

Colorado..  2 

Nebraska   | .  .  .  . 
Minnesota 
Arkansas .  1 


Tennessee. 
S.Carolina 
New  Mex. 


Total. 


207 


289 


19 


Ruild- 
1921         ins 
jjan.  1, 
I    1921 


195 
283 
204 

94 

00 . 9 

85.4 
59.5 
31.8 
35.9 
30.0 


212 

281 
233 


317  1366 
J310  |313 
;24!)         277 


100         111 
07 . 9      72 . 0 


217 
120 


90.9     102         118 

71.4  SO. 2  j  84.7 
52.3  I  01.0  '  00.7 
40.0   j   58.0   i    54.6 

30.5  47.2       53.2 


15. 
34. 


41 

7 

7 

50 

6 

00 

5 

00 

0 

21) 

1 

20 

Average 
Size  of 
Refineries 
Jan.  1,  1921 
(In  Thou- 
sands of 
Barrels 
per  Day) 


24.4   i   24.4 
10.2       10.4 


7.00 


42.0 
35.0 
35.0 
24.4  1  34  5 
15.8       17.0 


2.001    11.7       15.2 
15  0 
7,70 
5 .  00 


0.80 
1.25 


0.50 


7.701     7.90 

I 

!     4.00 


0.80 
1.50 


0 .  80' 
1.70i 

I     0 . 50 

0.30       1.50 
0.30      0.00 

i      0 . 50 


4.00 

4  00 
1 .  75 
1.50 
1.00 
0 .  50 

0.50 


10.00 
2.00 


1180   I    1295   I    1531   !    1888   I    76.6 


4.5 
7.6 
3.5 
27.2 
6.30 

2.1 
2.5 
5.1 
4.0 
13.0 

10.5 
5.0 

11.7 
2.9 
3.4 

2.2 
7.5 
1.5 
5 

4 

4 

0.0 

0.8 

1.0 

0.5 

0.5 


the  oil-fields  of  the  country.  If  the  industrial  and  agricultural 
density  of  the  country  is  held  in  mind,  the  analysis  of  refinery  figures 
just  given  will  point  to  the  regions  where  further  refinery  develop- 


TYPES   OF   REFINERIES 


93 


ments  are  likely  to  take  place.  It  is  quite  apparent  that  refinery 
installation  is  unduly  concentrated  in  the  south-central  states  and  a 
high  refinery  mortality  is  in  consequence  to  be  looked  for  in  that 
region. 

Types  of  Refineries. — An  economic  classification  of  refineries  into 
fundamental  types  has  been  given  on    page    77.      Unfortunately 


OVER   10,000   BARRELS 
DAILY   CAPACITY 


5,001-10,000  BARRELS 

2,501  ■  5,000  BARRELS 
UNDER  2,501   BARRELS 

E.COAST  PENN.         ILL.     IND.  KAN.  TEX.  -  LA.         WYO.  CALIF. 

ETC.  ETC.        OKLA.   ETC.  COLO. 

FIGURES   IN    RECTANGLES   ARE   THOUSANDS   OF    BARRELS  DAILY  CAPACITY 

Fig.  38. — Refinery  capacity  in  various  parts  of  the  country,  Oct.,  1920,  by  sizes 
of  refineries;   data  from  Oil  Weekly. 


statistical  data  arc  wanting  for  measuring  the  aggregate  capacity  of 
each  type.  The  Bureau  of  Mines,  however,  has  published  a  list  of 
refineries  ^  in  which  each  refinery  is  classified  according  to  the  range 
of  products  turned  out.  This  list  yields  information  of  value  with 
reference  to  the  relative  miportance  of  the  refinery  types,  although 
the  figures  must  be  used  with  some  discretion,  since  a  single  plant 
may  include  two  or  more  components  of  different  character.  For 
example,  many  of  the  refineries  along  the  East  Coast  classified  by  the 

1  Petroleum  Refineries  in  the  United  States,  January  1,  1921,  U.  S.  Bureau 
of  Mines. 


94 


ANALYSIS  OF  REFINERY  CAPACITY 


Bureau  of  Mines  as  complete  plants  are  really  dual  plants,  comprising 
a  complete  refinery  and  in  addition  a  topping  plant. 

Table  43.  — Refinery  Capacity  of  the  United  States  in  October,  1920,  by 
Refinery  Districts  and  Sizes  of  Refineries  * 

(In  thousands  of  barrels  'per  day) 


Refinery  District 

Under 

1001 

Barreb 

1001-2500 
Barrels 

2501-5000 
Barrels 

5001- 
10,000 
Barrels 

Over 
10,000 
Barrels 

Total 

East  Coast 

Penn,  etc 

2.1 

29.3 
.5t 
8.9 
1.5t 
..36.9 
9.2t 
25.5 
12. 2t 
4.2 
2. If 
10.7 
.3t 

2.5 
13.5 

12.3 
1.3t 

97.2 

15. 2t 

62 

16t 
5.5 

8.6 

20.5 
13.3 

29 

5t 
85.4 
12. 5t 
143 
15t 

7.5 

21.7 

3t 

86.5 
22.9 

26.5 

6t 
79.5 

6.5t 
60.5 
36t 
10 
17t 
40 

266 
15t 

64 

74.0 

267 

108 1 
47 

263 

378 
15t 
79 
.5t 

141 
14t 

373 
43t 

557 

187 1 
74 
19t 

344 
3t 

111.,  Ind.,  etc 

Kan.-Okla.,  etc 

Texas-Louisiana.  .  . 
Wyo.-Colo.,  etc. . . . 
California 

Total 

118 
25. 6t 

202 
32. 5t 

325 
35. 5t 

287 
65. 5t 

1015 
123 1 

1946 
282t 

*  Data  from  U.  S.  Bureau  of  Mines  and  Oil  Weekly,  Oct.  15,  1920. 
t  Refinery  capacity  under  construction,  Oct.,  1920. 

The  refinery  capacity  of  the  countrj'  on  January  1,  1921,  classified 
according  to  refinery  types  as  determined  by  the  range  of  products 
turned  out,  is  shown  in  detail  by  states  in  Table  44,  while  the  figures 
for  the  countiy  as  a  whole  are  interpreted  graphicallj^  in  Fig.  39. 
The  quantitative  importance  of  the  skimming  types  is  especially 
notable  and  the  data  shown  illustrate  the  dominance  of  such  plants 
under  present  conditions. 

Relation  of  Capacity  to  Storage. — The  supply  of  petroleum  prod- 
ucts is  contingent  upon  refining  capacity,  while  the  ease  with  which 
the  continuity  of  the  supply  is  maintained  is  in  part  dependent  upon 
the  extent  of  storage  facihties.  The  storage  capacity  in  respect  to 
gasohne  is  particularly  important,  since  the  demand  for  this  product 
is  strongly  seasonal  in  character,  being  roughly  twice  as  great  in 
summer  as  in  winter,  and  the  dependence  of  the  supply  upon  the 
activit}^  of  the  skimming  plant  is  especialh'  marked.  In  periods 
such  as  the  winter  of  1920-21  when  numbers  of  smaller  plants  shut 


RELATION  OF  CAPACITY  TO  STORAGE 


95 


90,1 


80;^ 


40,'? 


30,'i 


COMPLETE    PLANTS 


SKIMMING   PLANTS 


down,  the  question  arises  as  to  the  probable  effect  upon  the  quantity 
of  gasohne  accumulating  in  storage  to  meet  the  peak  demand  of  the 
coming  summer. 

Considerable  light  is 
thrown  upon  this  point 
b}^  Fig.  40,  which  shows 
for  various  parts  of  the 
country  the  approxi- 
mate gasoline  storage 
present  in  the  large, 
medimn-sized,  and  small 
refineries.  This  chart 
is  based  upon  the  gaso- 
line actually  in  storage 
on  March  31,  1920 1 
(the  month  when  gaso- 
line stocks  are  usually 
at  their  highest  level); 
and  is  therefore  a  fairly 
good  index  of  the  dis- 
tribution of  storage 
capacity  subsequently, 
since  further  develop- 
ment of  storage  will  not 
substantially  affect  the 
relations  shown.  It  is 
at  once  apparent  that 
the  gasoline  storage 
capacity  of  small  re- 
fineries is  practically  in- 
significant as  measured 
against  that  of  large 
refineries. 

Comparison  of  Fig. 
40  with  Fig.  38,  more- 
over, indicates  that 
storage  capacity  for 
gasoline  is  roughly 
proportional  to  refin- 
ing  capacity,  with   the 

notable  exception   of  the   Illinois-Indiana  district,  where  the  gaso- 
hne storage  vastly  exceeds   the    normal   ratio;   and  of  California, 
'  From  data  sup;)lied  by  H.  F.  Mason  of  the  U.  S.  Bureau  of  Mines. 


SKIMMING   &    LUBR.    PLANTS 


WAX   PLANTS 


SKIMMING   &    ASPHALT   PLANTS 


TOPPING    PLANTS 


ALL    OTHERS 


FIGURES    IN    RECTANGLES    REPRESENT 

DAILY    REFINERY    CAPACITY    IN    UNITS 

OF   1000    BARRELS 

Fio.  39. — Refinery  capacity  of  the  United  States  on 
Jan.  1,  1921,  classified  by  tyjx's  of  refineries;  data 
from  U.  S.  Bureau  of  Mines. 


96 


ANALYSIS  OF  REFINERY  CAPACITY 


Table  44. — Refinery  Capacity  of  the  United  States  on 

Compiled  from  data  collected 
(In  thousands  of 


Topping 
Plant 

Skimming 
Plant 

Skimming 

AND 

Asphalt 

Sklmming 

AND 

Coke 

Asphalt 
Plant 

Skim.,  Lub. 

AND 

Asphalt 

State 

Tops, 

Distillates, 

Gas  and 

Fuel  Oils 

Gasoline 

Kerosene, 

Gas  and 

Fuel  Oils 

Gasoline, 
Kerosene, 

Gas  and 
Fuel  Oils, 

Asphalt 

Gasoline, 
Kerosene, 
Gas  and 
Fuel  Oils, 
Coke 

Distillates, 
Gas  and 

Fuel  Oils, 
Asphalt 

Gasoline, 

Kerosene, 

Gas  and 

Fuel  Oils, 

Lubricating 

Oils, 

Asphalt 

Texas 

4.75 

161.85 

15 

California 

59.3 

56.95 

20.6 

0.85 

23.15 

Oklahoma.. .  . 

176.8 



New  Jersey .  . 

5.5 

Louisiana .... 

3 

36.25 

37 

Pennsylvania. 

1.305 

5 

10 

Ivansas 

56.15 

Wyoming. .  .  . 

1 

20.9 

9.8 

Illinois 

24 

Indiana 

3.2 

Maryland 

3 

New  York .  .  . 

Massachusetts 

10 

25 



Ohio 

4.6 

Missouri 

5 

Kentucky .... 

8.2 

5 

Rhode  Island. 

10 

5 

West  Virginia. 

0.5 

Virginia 

o 

Georgia 

Utah 

Colorado.  .  .  . 

0.05 

Nebraska.  .  .  . 

1 

Minnesota .  .  . 

Arkansas .... 

1 

1 
Tennessee 

0.5 

S.  Carolina..  . 

New  Mexico. . 
Total 



83.05 

562.205 

88.1 

14.8 

33.85 

33.15 

Percentage.. . 

4.4 

29.8 

4  7 

0.8 

1.8 

1.8 

TYPES  OF  REFINERIES 


97 


Jan.  1,  1921,  by  States,  Classified  by  Types  of  Refineries 
by  the  U.  S.  Bureau  of  Mines) 
barrels  per  day) 


Skim.,  Lub. 

AND 

Coke 

Skimming 

AND 

Lubricating 

LUBRICAT-I 
ING 

Plant 

i 
Wax 
Plant 

Complete 
Plant 

Unclas- 
sified 

Total, 

Jan.  1, 

1921 

Building, 

Jan.  1, 

1921 

Gasoline, 

Kerosene, 

Gas  and 

Fuel  Oils, 

Lubricating 

Oils, 

Coke 

Gasoline, 
Kerosene, 
Gas  and 
Fuel  Oils, 
Lubricating 
Oils 

Gas  and 
Fuel  Oils, 
Lubricat- 
ing 
Oils 

Gasoline, 
Kerosene, 
Gas  and 

Fuel  Oils, 

Lubricating 

Oils, 

Paraffin 

Wax 

Gasoline, 
Kerosene, 
Gas  and 
Fuel  Oils, 
Lubricating 
Oils,  Paraf- 
fin Wax, 
Coke,  or 
Asphalt, 
or  Both 

39.5 

6.5 

5.4 

130 

2.75 

365.75 

41.65 

52.6 

4.2 

95.5 

0 

2 

313.35 

44.9 

1.1 

52.0 

2 

0 

276.8 

7.5 

210.0 

1 

0 

216.5 

6 

2 

1 

40 

0 

25 

119.5 

5 

11.250 

0.8 

29.745 

59.5 

117.6 

12 

3 
4.3 

1 
0.1 

2 
1 
4 

0.2 

1 
0.5 

3 

9.5 
35 

1 
2.9 

6.2 
4 

4 

23.3 
50 

38 
34 

26.9 
12 

1.5 

0 

5 

84.65 
66.7 
54.6 
53.2 

42 

35 

35 

34.5 

17 

15.2 
15 

7.7 

5 

4 

4 

1.75 

1.5 

1 

0.5 

0.5 

0.2 
1.2 

3 
0.05 

10 

2 

12 

167.35 

12.4 

149.945 

724.7 

6 

7 

1888.3 

76.6 

1     0.6 

8.9 

0.6 

7.9 

3.8.4 

0 

3 

100 

98 


ANALYSIS  OF  REFINERY  CAPACITY 


PENN. 
ETC. 


ILL. -IND.  KAN.  TEX.  -  LA. 

ETC.  OKLA.   ETC. 


WYO. 
COLO. 


:%%1^0VER   10,000   BARRELS 
^'\6<S^  DAILY   CAPACITY 

^5,001-10,000   BARRELS 

*-2,501  -  5,000 
CALIF  ^UNDER    2,50l 


FIGURES   IN    RECTANGLES   ARE    MILLIONS   OF   GALLONS 


Fig.  40. — Relative  storage  capacity  for  gasoline  in  various  parts  of  the  country, 
classified  by  sizes  of  refineries;  based  upon  quantity  of  gasoline  in  storage  on 
March  31,  1920. 


APPALACHIAN 
N. CENTRAL 


MID.CONTINENT 


ROCKY   MTN. 


LUBR.OILS       REF.CAPACITY 


Fig.  41. — Relative  storage  capacitj'  for  the  principal  petroleum  products  in  vari- 
ous parts  of  the  country,  compared  with  crude-still  capacity;  based  upon 
figures  for  Oct.,  1920. 


GROWTH  OF  REFINING   CAPACITY 


99 


where  the  gasoHne  storage  falls  short  of  the  normal  ratio.  In 
the  first  instance,  the  departure  from  normal  points  to  the  marked 
degree  to  which  Mid-Continent  gasoline  is  stored  in  the  north- 
central  district;  while  in  the  second  instance,  the  relatively  low 
ratio  of  gasoline  storage  to  refinery  intake  is  due  to  the  low  gasoline 
content  of  Cahfornia  crudes,  to  the  fact  that  the  storage  was  not  full 
at  the  time  noted,  and  to  the  less  accentuated  seasonal  variation  of 
demand  in  that  state. 

The  relative  storage  capacity  in  the  various  parts  of  the  country 
for  the  main  petroleum  products  other  than  gasoline  may  be  inferred 
from  the  quantities  of  such  products  in  storage  on  October  31,  1920, 
when  stocks  were  large.  A  general  view  of  such  storage  capacity, 
compared  with  refining  capacity,  is  presented  in  Fig.  41,  which 
shows  with  a  fair  measure  of  accuracy  the  conformity  and  discrep- 
ancy between  the  two. 

Growth  of  Refining  Capacity. — The  growth  of  refining  capacity 
over  a  number  of  years  is  shown  in  Table  45,  in  which  the  capacity 
for  January,  19 IS,  is  called  100  and  the  subsequent  dates  are  expressed 
in  percentages  of  that  number.     (See  also  Table.  42.) 


Table  .52. — Growth  of  Refinery  Capacity  in  the  United  States,  in 
Percentages  of  the  Capacity  in  January,  1918 


January,  1918 

January,  1919 

January,  1920 

January,  1921 

Texas 

100 
100 
100 

100 
100 
100 

100 

109 

99 

114 

106 
107 
116 

109 

162 
109 
122 

118 
120 
136 

129 

188 
111 
141 

230 
138 
183 

159 

California 

Oklahoma 

New  Jersey 

Pennsylvania 

Others 

Whole  country 

The  table  shows  the  notable  degree  to  which  refinery  installations 
developed  in  1919  and  1920,  particularly  in  Texas  and  New  Jersey. 
The  refinery  capacity  of  the  entire  country  increased  18  per  cent 
during  1919,  and  23  per  cent  in  1920,  with  an  additional  capacity 
under  construction  at  the  beginning  of  1921  amounting  to  4  per 
cent  of  the  total.  It  would  seem  that  refinery  capacity,  in  common 
with  many  lines  of  activity,  ovcrexpandcd  in  the  Ixkhu  period  follow- 
ing the  armistice,  and  hence  faced  the  1920-1921  period  of  business 
liquidation  in  an  inflated  condition.     The  effect  of  the  rapid  exploita- 


100 


ANALYSIS  OF  REFINERY  CAPACITY 


tion  of  the  Texas  oil-fields  is  reflected  in  refinei\y  installations  in  that 
state,  while  the  growing  quantity  of  Mexican  oils  imported  into  the 
United  States  is  partly  responsible  for  the  increased  capacity  in 
New  Jersey. 

Refining  Capacity  Utilized. — For  a  number  of  years  only  about 
three-quarters  of  the  installed  refining  capacity  of  the  country  has 
been  actually  utilized,  which  reflects  in  further  degree  the  over- 


THOUSANDS 

OF  BARRELS 

DAILY   CAPACITY 


Fig.  42. — Used  and  unused  refinery  capacity  of  tiie  United  States  by  months, 
1918-1921;  data  from  U.  S.  Bureau  of  Mines. 


expanded  condition  in  which  the  oil-refining  industry  found  itself 
when  the  period  of  rapid  expansion  was  terminated  b}"  the  business 
depression  in  1920.  The  unused,  or  idle,  refinery  capacity  in  the 
United  States  by  months,  1918-1921,  is  shown  graphically  in  Fig.  42, 
prepared  from  data  published  by  the  U.  S.  Bureau  of  Mines  as  given 
in  Table  46. 

The  unused  refinery  capacity  in  various  parts  of  the  country  in 
October,  1920,  when  refining  operations  were  unusually  vigorous,  is 


REFINING   CAPACITY   UTILIZED 


101 


Table  46. — Operating  and  Idle  Refinery  Capacity  of  the  United  States 
BY  Months,  1918-1921 

(Data  from  U.  S.  Bureau  of  Mines  *) 


Date 

Refineries  Operated 

Total  Number  of 
Refineries 

Idle 
Equipment 

No. 

of 

Plants 

Daily 

Capacity 

of  Plants 

Operated 

(In 

Thousands 

of  Barrels) 

Daily 

Crude 

Run  of 

Plants 

(In 

Thousands 

of  Barrels) 

No. 

of 

Plants 

Total  Daily 

Capacity 

of  All 

Plants 

(In 

Thousands 

of  Barrels) 

No.  of 

Idle 
Plants 

Total  Idle 

Capacity 

of  All 

Plants 

(In 

Thousands 

of  Barrels) 

I'JIS.  January. . 
February. 
March. .  . 

245 

1158 

769 
835 
846 

1190 

421 

April .... 

May 

June 

873 
920 
938 

'i2i8' 

July 

August. .  . 
September 

941 
920 
946 

October. . 
November 
December 

'2G7 

'i226' 

943 
914 

870 

'289 

1295' 

'22' 

'425' ' 

1919.  January.. 
February. 
March.  .  . 

'277 

'1243' 

870 
901 
899 

April .... 

May 

June 

920 
976 
964 

July 

August. .  . 
September 

'287 

'i277' 

1007 
1044 
1087 

October.  . 
November 
December 

290 
■  '262 

1338 

'isi^o' 

1087 
1074 
1046 

'  '  373 

1531' 

'8i' 

' '485' 

1920.  January.. 
February. 
March . .  . 

'2G.^ 

'i5(i0' 

994 
1007 
1084 

373 

1531 

537        j 

April .... 

May 

June 

'307 

'iooi' 

1095 
1115 
1164 

'i593' 

"429' 

July 

August. .  . 
September 

311 
322 
324 

1637 
1071 
1675 

1194 
1283 
1352 

October .  . 
November 
December 

332 
32(3 
328 

1087 
1698 
1714 

1312 
1315 
1306 

1921.  January. . 
February. 
March.  .  . 

311 
201 
290 

1721 
1692 
1697 

1279 
1 2.35 
1145 

415 

1889 

104 

610 

Anril .... 

May 

June. . . . 

299 
302 
310 

1747 
1739 
1760 

12.53 
1193 
1231 

:::: 

♦Compiled  in  part  by  M.  C.  Ehlen. 


102 


ANALYSIS  OF  REFINERY  CAPACITY 


given  in  Fig.  43,  where  the  unused  capacity  may  be  seen  to  have 
been  much  greater  in  the  southwest  than  in  the  eastern  and  the 
northcentral  states. 

The  unproductive  capital  tied  up  in  the  idle  equipment  is  worthy 
of  emphasis,  as  w^ell  as  the  poor  prospects  for  financial  success  enjoyed 
by  new  and  improperly  located  ventures  in  the  face  of  the  conditions 
depicted.  The  high  production  costs  of  products  flowing  through 
plants  running  short  of  full  capacity  are  not  sufficiently  recognized, 
owing  to  cost  accounts  that  fail  to  measure  this  factor;  but,  as  pointed 
out  by  Gantt,  Polakov,  and  other  industrial  engineers,  this  matter 
is  a  potent  cause  of  financial  loss  and  even  failure,  and  should  receive 
the  closest  attention  and  study. 


10 

^  OPERATING 
20                30 

40 

50 

I-'-'- 

.■•.■•S|lDLE 

80 

90 

( 

60 

70 

100 

1                              1                              .                              i                              :                               1                              {                               1                              1                              1 

EAST    COAST 

83 

;:i 

f:;:;iji;; 

m 

1         :         '                          ^ 

1       1 

PENN.   etc. 

8G 

■:'::2o::: 

m 

1                                       1                    1                    1                    1                            ' 

1      1 

ILL.-IND.   etc. 

87 

|x:v3:;; 

:-:i\ 

1            1            1            1            1                        !            1            1            1 

KAN.  -OKLA. 

56 

!:■:;:::•:■:: 

■•:-:4'4::: 

m 

1            1            1            1            1            1            1            1            1           1 

TEX. -LA. 

62 

:^ 

:;;:-38;;. 

>:-i 

1           1           !           1           1           1           1           1           1           1 

WYO.  -COLO 

63 

: 

:-::;37;:: 

m 

1           1           1           i           1           1           1           1           1           1 

CALIF. 

64 

1 

:<:3^; 

m 

1           j           1           1           1           i           1           1           1           1 

COUNTRY 

68 

4-:;;.'':-:- 

■:::;32:: 

■■:■■■■ 

i            !                       :           1            1            1           1 

Fig.  43. — Proportion  of  installed  refinery  capacity  in  use  in  Oct.,  1920,  in  various 
parts  of  the  coiuitry;   data  from  U.  S.  Bureau  of  Mines  and  Oil  Weekly. 

Conclusions. — The  foregoing  analysis  of  refinery  capacity  affords 
quantitative  evidence  for  a  number  of  deductions  that  are  fairly 
well  known  qualitative^ ;  namely,  that  refinery  capacity  is  con- 
siderably greater  than  the  needs  of  the  countrj^;  that  much  of  this 
capacity  is  poorly  located  for  survival;  that  a  notable  percentage 
of  the  capacity  is  of  the  skimming  or  incomplete-run  type  and  hence 
poorly  adapted  for  profitable  operation  with  high  cost  crudes;  that 
the  installation  of  refinery  capacity  enjoyed  an  accelerating  growth 
well  into  the  period  of  industrial  depression ;  and  that  the  oil-refining 
industry  as  a  whole  is  handicapped  by  idle  capital  investment  to  the 
extent  of  unused  refinery  capacity. 

Projected  into  the  future,  these  conditions  spell  considerable 
readjustment  in  the  refinery  situation;  first,  as  a  result  of  the  period 
of  business  liquidation  of  1920-1921 ;  and,  second,  as  a  result  of  the 
stringency  in  domestic  crude  supply  that  is  due  to  follow. 


CONCLUSIONS  103 

On  the  whole,  it  is  apparent  that  the  refinery  situation  reflects 
in  no  uncertain  terms  the  peculiar  economic  conditions  surrounding 
the  production  of  crude  petroleum;  small,  incomplete  refineries 
spring  up  in  proximity  to  flush  production  only  to  die  again  as  the 
wave  of  oil-field  development  passes  on.  The  growth  of  refinery 
capacity  has  apparently  been  influenced  more  by  supply  than 
demand;  the  future,  it  would  seem,  will  dictate  a  closer-knit  coordi- 
nation with  all  the  economic  factors  involved  through  a  process  of 
elimination  that  will  affect  developments  projected  without  due 
regard  to  these  considerations, 


CHAPTER  Vlli 


THE  OUTLOOK  FOR  OIL  REFINING 


CENTS   PER 
GALLON 


DECREASE 
+1D0fo 


■20 


0 
J- 10 
1-20 


Conditions  are  grad- 
ually developing  in  the 
oil  situation  under  which 
those  refineries  running 
domestic  crudes,  which 
are  not  prepared  to 
operate  as  plants  turn- 
ing out  lubricating  oils, 
will  have  to  go  out  of 
business  as  unprofitable 
enterprises.  This  deduc- 
tion is  based  upon  the 
trend  of  prices  and  values 
as  revealed  during  the 
eight-year  period,  1913— 

1920,  the  continuation 
of  which,  following  the 
industrial  depression    of 

1921,  is  predicated  upon 
the  growing  inability  of 
the  domestic  output  of 
crude  petroleum  to  meet 
the  country's  require- 
ments. 

Trend  of  Prices,  1913- 

1920.^ — The     course    of 

market     conditions     for 

crude  petroleum  and  its 

principal     products     for 

1913-1920       is      shown 

graphically  in  Fig.  44,  in 

..  ...     Trend  of  the  average   prices   of   crude   which  the  slopes  of    the 

petroleum    and    its   principal   products   in   the   five  curves   indicate    the 

United  States  by  years,  1913-1920.  direction    and    intensity 

1  A  fuller  discussion  of  prices  is  given  in  Chapters  17  and  IS,  which  should 

be  consulted  in  the  present  connection. 

104 


uu 

bU 

1 

40 

1 

L 

JBRIC/ 
OIL 

kTlNG 

X— -" 

/ 

1 

1 

\SOLI^ 

E     >/ 

20 

1 

■— ^ 

-^ 

> 

::^^' 

10 

"^ 

~ 

/ 

/ 

/ 

y^ 

9 
8 

7 

6 

^^^ 

y^ 

~~ — 

KERO 

SENE 

/ 

/   •■■ 

CRl 

IDE    PETROL 

EUM 

^^^^ 

'     .•■ 

5 

4 

] 

/ 

y 

/••;' 

FUEL 

OIL 

3 

^  .* 

^ 

2 

1 

■% 

1913  1914  1915  1916  1917  1918  1919  1920 


Fig.  44.- 


TWO  TYPES  OF  PRICES 


105 


PER  CENT      ftvEHiAGE    PRICES    FOR   1913  =  lOO 
500 


of  the  economic  forces  at  work.  The  outstanding  feature  of  the 
chart  is  the  marked  advance  over  the  past  few  years  in  the  price 
of  lubricating  oils  contrasted  with  the  relative!}^  moderate  rate  of 
increase  in  the  price  of  gasoline.  The  advances  in  the  prices  of 
crude  petroleum,  fuel  oil,  and  kerosene  are  intermediate  in  degree 
between  lubricating  oils, 
on  the  one  hand,  and 
gasoline,  on  the  other, 
though  tending  to  ap- 
proach the  former.  The 
differential  changes  in 
prices  of  the  four  major 
joint-products  of  crude 
petroleum  are  of  great 
importance,  for  they  in- 
dicate corr  esponding 
changes  in  the  conditions 
under  which  oil-refining 
may  be  profitably  con- 
ducted. 

The  trends  shown  in 
Fig.  44  will  not  maintain 
themselves  through  the 
price  depression  of  1921, 
but  revealing  the  habit 
of  oil  prices  on  a  rising 
market  they  may  be  ex- 
pected to  reassert  them- 
selves when  oil  prices 
next  begin  to  advance 
under  pressure  from  the 
crude    petroleum  situa- 

^°^'  ,  Fig.    45. — Trend   of   the   i)rice   levels  of   crude 

Two  Types  of  Prices.       petroleum   and   its  i^rincipal  products    in    the 
— The  prices  of  lubricat-       United  Statrs  by  years,  1913-1920,  in  percent- 
ing  oils  and    fuel  oil    are       ages  of  the  average  prices  in  1913. 
determined   in  a  highly 

competitive  market  by  the  normal  operation  of  supply  and  demand, 
whereas  the  prices  of  gasoline  and  kerosene  are  to  a  dominant 
degree  decided  by  the  tank-wagon  price  set  for  these  products 
by  large  marketing  companies.  This  fundamental  distinction  be- 
tween the  two  groups  of  prices  should  be  held  clearly  in  mind  as 
it  is  an  important  key  to  the  course  of  prices  in  the  future.     In  short, 


1913  1914  1915  1916  1917  1918  1919 


106 


THE  OUTLOOK  FOR  OIL  REFINING 


the  one  set  of  prices    is    quite    sensitive  to    the  vagaries  of  the 
market,  while  the  other  set  of  prices  is  open  to  additional  influences 

with  a  stabilizing  re- 
sult. 

Fig.  45  illustrates 
the  extent  to  which  the 
prices  of  crude  petro- 
leum and  its  principal 
products  increased  be- 
tween the  pre-war  year 
of  1913  and  1920. 
It  will  be  observed 
from  this  chart  that 
the  prices  of  lubricat- 
ing oils  and  fuel  oil, 
together  with  crude 
petroleum,  rose  to 
higher  levels  than 
the  prices  of  kerosene 
and  gasoline,  the  last 
named  having  ad- 
vanced the  least  of  all. 
This  relationship  is 
significant  and  sug- 
gestive of  the  funda- 
mental difference  ex- 
isting between  the 
two  sets  of  prices. 
For  purposes  of 
comparison,  the  price 
level  of  commodities 
in  general  is  also 
entered  upon  Fig.  45, 
and  it  may  be  ob- 
FiG.  46. — Trend  of  the  output  of  crude  petroleum  and  ggj-ved  that  this  in- 
its   principal   products  in  the  United  States,  1914-     ,  ,.  -f       , 

1920,  compared  with  the  trend  of  gasoline  produc-    .   "'  '  '     ^      ~ 

tion.  imposed     upon     the 

price  curves,  will    di- 
vide them  into  the  two  fundamental  groups  already  noted. 

The  Stress  Product. — Although  gasoline  has  advanced  in  price 
in  less  degree  than  the  other  petroleum  products,  it  may  be  math- 
ematically demonstrated  (see  Fig.  46)  that  a  greater  discrepancy 
between  supply  and  demand  has  developed  in  respect  to  gasoline 


1913   1914   1915  1916   1917  1918   1919  1920 


THE   PROFIT   PRODUCT 


107 


SCALE 

OF 

INCREASE 

OR 

DECREASE 

+  100^ 


10 
20 
30 

n-  40 

-I-   50 5< 


than  in  regard  to  the  other  petroleum  products.  Fig.  46  shows  the 
trend  in  output  of  the  four  major  petroleum  products,  together  with 
the  trend  in  production  and  consumption  of  crude  petroleum.  The 
straight  line  indicating  the  average  trend  of  gasoline  production  is 
fitted  to  the  curves  showing  the  trend  of  production  of  fuel  oil,  kero- 
sene, lubricating  oils,  and  crude  petroleum.  The  angle  between  the 
average  trend  line  of  gasoline  production  and  the  trend  lines  of  these 
other  products  indicates  that  the  demand  for  gasoline  is  the  major 
economic  force  sending  millions 
the  oil  industry  for-  I'A'-li*!'^ 
ward.  It  is  observable 
that  the  gasoline  de- 
mand is  notably  strong- 
er than  the  supply  of 
crude  petroleum,  even  if 
imports  of  crude  petro- 
leum are  added  to  the 
domestic  production, 
and  in  consequence  a 
marked  lagging  in  the 
output  of  fuel  oil  and 
kerosene  is  taking  place 
in  order  to  compensate 
for  the  discrepancy.  It 
is  a  striking  fact  that 
the  petroleum  product 
which  has  been  enjoying 
the  strongest  demand 
is  the  one  which  un- 
derwent the  slightest 
price  advance. 

The  Profit  Product. 
— The  growth  in  value 
of  the  total  quantity  of 

crude  petroleum  and  its  principal  products  produced  in  this  country 
over  the  past  few  years  is  shown  in  Fig.  47.  The  close  coincidence  of 
gasoline  and  crude  petroleum  should  especially  be  noted.  The  inter- 
pretation of  this  chart  becomes  clearer  if  the  following  relationships, 
which  are  not  commercially  correct,  but  in  an  economic  sense  are 
true,  are  accepted  as  valid,  namel}^:  that  gasoline  receipts  pay  for  the 
raw  material;  kerosene  receipts  pay  for  refining;  and  fuel  oil  receipts 
pay  for  marketing,  leaving  the  receipts  from  lubricating  oils  as  profit. 
Referring  to  Fig.  47  in  detail,  it  will  be  observed  that  the  cost  of 


2000 

lOOO 
900 
800 

/ 

/ 

A 

600 

/'^ 

K 

f><.      CRUDE 
^      PETROLEU 

VI 

400 
300 

200 

100 
90 
80 
70 
60 
50 

GA 

50LINE 

// 

.•  / 
.•  / 

^ 

Y 

//^ 

"^^ 

/ 

FUEL 

OIL    .• 
V    / 
/  /' 

LUBSv^ 

/4kef 

OSENE 

\ 

^ 

'^ 

.y 

' 

,>■■' 

1913  1914   1915  191S   1917   1918  1919  1920 

Fig.  47. — Trend  of  the  value  of  the  domestic  output 
of  crude  petroleum  and  its  principal  products 
by  years,  1914-1920. 


108  THE  OUTLOOK  FOR  OIL  REFINING 

domestic  crude  in  1920  exceeded  the  value  of  gasoline  produced,  a 
circumstance  throwing  a  greater  burden  upon  the  other  products. 
A  close  coincidence  in  values  is  to  be  observed  for  fuel  oil,  kerosene, 
and  lubricating  oils. 

In  view  of  this  chart,  and  in  the  light  of  events  in  the  refining 
industry,  the  conclusion  is  offered  that  skimming  plants  are  profitable 
only  in  periods  of  flush  production  and  many  of  these  enterprises 
have  already  found  it  unprofitable  to  continue  in  business.  Refineries 
of  intermediate  character  are  next  in  line  to  feel  a  continuation  of  the 
type  of  stress  already  affecting  skimming  plants.  Only  lubricating 
plants,  therefore,  will  remain  as  the  logical  survivors  of  a  continua- 
tion of  the  present  competition,  which,  it  should  be  observed,  is 
operating  not  only  between  industrial  units,  but  between  the  economic 
forces  at  play  in  the  fashion  pointed  out  above.  Many  refineries  not 
making  lubricating  oils,  therefore,  under  the  conditions  lying  ahead 
ma}'  be  expected  to  show  no  profits  and  in  consequence  to  fail. 

Why  Gasoline  Prices  will  Continue  to  Lag. — A  change  in  the 
course  of  gasoline  prices  in  the  direction  of  accelerated  rise  in  level, 
would  obviate  the  consequence  otherwise  in  store  for  the  economically 
inefficient  refinery.  Gasoline  prices,  however,  may  not  be  logically 
expected  to  show  a  departure  from  their  past  performance.  This 
product  has  come  into  such  universal  use  and  touches  the  public  at  so 
many  points  that  it  has  essentially  become  a  public  utility  in  an 
economic  sense.  The  surmise  is  made  that  this  fact  is  not  only 
recognized  but  has  been  acted  upon  by  the  marketing  companies 
setting  the  price  pace  for  gasoline;  and  the  price  has  been  tempered 
accordingly.  But  this  deduction  does  not  rest  alone  upon  surmise. 
Figs.  44^6  are  presented  in  support  of  this  theory.  In  no  other  way 
could  a  stress  product  show  the  mildest  advance  in  price  amongst  its 
fellows. 

Why  Non-lubricating  Refineries  will  Fail. — Fig.  48  shows  the 
increase  in  value  of  the  main  petroleum  products  over  recent  years 
compared  with  the  cost  of  the  domestic  crude  petroleum  entering 
into  their  fabrication.  Imported  crude  pet  role  imi  and  minor  petro- 
leum products  do  not  appear  on  the  chart  because  of  the  lack  of  sta- 
tistical data,  but  these  groups  approximately  balance,  and  the  chart 
presents  the  true  situation  as  it  stands.  The  price  of  domestic  crude 
petroleum  in  the  long  run  will  continue  to  advance  (irrespective  of 
minor  fluctuations  immediately  ahead)  and  the  price  of  gasoline  will 
also  continue  to  lag  in  its  advances  behind  the  prices  of  its  joint- 
products.  The  condition  developing  in  1920  and  shown  in  Fig.  48, 
where  gasoline  and  most  of  the  kerosene  are  necessary  to  support 
the  cost  of  crude,  leaves  Httle  margin  of  profit  for  plants  not  making 


WHY   NON-LUBRICATING   REFINERIES   WILL   FAIL      109 

lubricating  oils.  This  differential  is  decreasing  under  the  influences 
of  the  forces  gathering  impetus  in  the  situation,  and  within  a  very 
few  years  the  failure  of  refineries  which  are  running  domestic  crude, 


DOLLARS 

2800 


1800 
1600 
1400 
t200 


200 


—  COST  OF   DOMESTIC   CRUDE 


VERTICAL    BARS   REPRESENT  VALUE  OF   U.S.    PRODUCTION 


iBfc 


LUBRICANTS 


KEROSENE 


1914 


1916 


1917 


1918 


1919 


1920 


Fig.  48. — Comparison  of  the  relative  importance  of  the  principal  petroleum 
products  as  sources  of  revenue  to  the  oil  industry,  1914-1920,  contrasted  with 
the  cost  of  crude  petroleum. 

but  are  inadequately  equipped  for  extracting  the  full  range  of  values 
from  their  raw  material,  may  be  expected  to  be  widespread. 


CHAPTER  IX 
GASOLINE 

Gasoline  cannot  be  commercially  manufactured  as  a  single 
product,  since  its  production  involves  the  output  of  at  least  two  other 
products,  kerosene  and  fuel  oil.  Gasoline,  in  consequence,  is  a  joint- 
product  of  crude  petroleum,  and  its  whole  economic  status  is  colored 
by  this  circumstance. 

Before  the  advent  of  the  automobile,  the  production  of  kerosene 
in  growing  quantity  necessitated  the  output  of  more  gasohne  than 
could  be  absorbed  by  the  small  market  for  this  product;  gasoline 
was  then  troublesome  to  dispose  of  and  state  inspection  laws  were 
passed  to  prevent  the  adulteration  of  kerosene  with  gasoline.  With 
the  rise  of  automotive  transportation,  however,  the  demand  for 
gasohne  soon  exceeded  that  for  kerosene,  thus  reversing  the  relation- 
ship of  the  two  products.  Now  the  production  of  kerosene  is  inci- 
dental to  the  manufacture  of  gasoline,  and  there  is  a  growing  tendency 
for  the  light  components  of  kerosene  to  be  included  in  the  gasohne 
turned  out,  so  insistent  is  the  demand  for  the  latter;  although  state 
inspectors  are  still  maintained  at  pul)lic  expense  to  keep  the  gasoline 
out  of  kerosene. 

The  commercial  supply  of  gasoline  is  composed  of  natural,  or 
straight-run,  gasoline;  a  volatile  gasoline  won  from  natural  gas; 
synthetic  gasoline  made  by  "  cracking  "  heavier  petroleum  distillates; 
and  naphthas  which  alone  would  rank  as  light  kerosene. 

Natural  Gasoline. — Natural  gasoline,  also  known  as  straight-run 
gasoline,  is  made  up  of  the  components  of  crude  petroleum  that  distil 
off  at  relatively  low  temperatures.  A  few  years  ago,  natural  gasoline 
was  the  only  type  of  gasoline  on  the  market  and  for  that  reason  is  still 
commonly  believed  to  be  the  best  type  obtainable.  Many  automo- 
bile users  have  been  educated  to  demand  straight-run  gasoline,  and 
feel  that  the  more  common  blended  varieties  are  inferior  substitutes. 
As  a  matter  of  fact,  however,  the  greater  part  of  the  gasoline  mar- 
keted to-day  is  some  sort  of  blend  and  "  many  of  the  blended  products 
are  preferable  to  straight-run  products,  particularly  if  the  added  con- 
stituent is  so-called  *  casing-head '  gasoline  derived  from  natural  gas."^ 

1  Hill  and  Dean,  Quality  of  Gasoline  Marketed  in  the  United  States,  Bull.  191, 
U.  S.  Bureau  of  Mines,  1920,  p.  5. 

110 


NATURAL-GAS   GASOLINE  111 

Natural-gas  Gasoline. — Between  1910  and  1920  a  rapidly  increas- 
ing and  significant  yield  of  gasoline  has  been  attained  through  the 
recovery  of  a  highly  volatile  gasoline  from  natural  gas,  which  has 
been  blended  with  straight-run  gasoline  or  with  distillates  too  heavy 
to  rank  alone  as  gasohne.  The  raw  product  is  commonly  called  casing- 
head  gasoline  ^  and  it  enlarges  the  gasoline  supply  to  a  greater  extent 
than  its  actual  volmiie,  since  its  employment  renders  available  for 
motor  use  considerable  quantities  of  distillates  that  in  their  original 
state  lacked  a  large  enough  proportion  of  low-boiling  constituents 
to  make  satisfactory  motor-fuels. 

Because  of  the  cheapness  with  which  casing-head  gasoline  could 
be  won  as  a  by-product  from  natural  gas,  and  the  scope  for  expansion 
offered  by  the  field,  the  growth  of  the  casing-head  gasoline  industry 
has  been  rapid.  In  1920  casing-head  gasoline  was  responsible  for 
around  a  tenth  of  the  country's  total  gasoline  output.  The  growth 
of  this  contribution,  however,  has  begun  to  slacken,  and  a  general 
survey  of  the  natural  gas  situation  would  seem  to  indicate  that 
contributions  froin  this  source  have  already  reached  approximately 
50  per  cent  of  theu"  ultimate  capacity.  Developments  pointing 
to  the  same  conclusion  are  to  be  found  in  the  fact  that  the  casing- 
head  gasoline  industr^^  grew  up  on  the  basis  of  the  compression 
process  which  extracts  gasoline  from  "  wet  "  gas  heavily  laden  with 
gasoline  vapor,  whereas  attention  is  now  turning  in  growing  degree 
to  the  leaner  so-called  dry  gas  which  requires  a  more  intimate  absorp- 
tion process  to  yield  results. 

Cracked  Gasoline. — A  growing  quantity  of  gasoline  is  manufac- 
tured from  heavy  petroleum  fractions  by  processes  of  cracking  dis- 
tillation, whereby  the  hea\y  hydrocarbons  are  decomposed  or 
"  cracked  "  into  lighter,  more  volatile  components  approximating 
straight-run  gasoline  in  performance.  Cracked  gasoline  is  not  used 
as  such,  but  is  blended  with  straight-run  gasoline  and  casing-head 
gasoline  to  make  a  commercial  product.  Most  of  the  cracked  gaso- 
line is  made  by  the  Burton  process,  developed  and  controlled  b}'  the 
Standard  Oil  Company  of  Indiana,  but  leased  bj^  this  organization 
to  certain  other  companies.  The  total  quantity  of  cracked  gasoline 
now  produced  is  not  definitely  known,  but  in  1918  the  output  was 
approximately  360  million  gallons,  or  about  one-tenth  of  the  country's 
total  production  of  gasoline,  a  ratio  which  probably  obtained  with 
little  change  in  1920. 

'  In  1921,  manufacturers  of  gasoline  from  natural  gas  formed  an  "Association 
of  Natural  Gasoline  Manufacturers"  and  adopted  the  trade  name  "natural 
gasoline"  to  supersede  "casing-head  gasoline"  for  gasoline  made  from  natural 
gas.  As  used  in  this  book,  however,  natural  gasoline  designates  gasoline  won 
from  |)etroleum  by  straight  refining. 


112 


GASOLINE 


Changing  End-point  of  Gasoline. — Gasoline  is  not  a  single  chem- 
ical product  possessing  definite  properties,  but  is  a  series  of  related 
compounds  running  from  hydrocarbons  with  small,  light  molecules 
to  hydrocarbons  of  larger  and  heavier  molecular  character.  Gasoline, 
therefore,  is  a  chain  of  compounds  ranging  from  hght,  highly  volatile 
components  through  graded  intermediates  to  relatively  heavy,  less 
volatile  end-products.  The  character  of  the  compounds  at  the  light 
and  heavy^  ends  of  the  series  is  fixed  at  any  given  moment  by  the  dic- 
tates of  commercial  practice  and  economic  requirements,  but  in 
a  manner  that  may  be  correlated  with  the  conditions  of  supply  and 
demand  governing  the  production  of  gasoline. 


4fb 
450 

ANALYSES    BY 
0=U.S.     BUREAU    OF    MINES 

,J..os]^^^^/r^ 

425 

A=  AUTOMOTIVE    FUEL    CLUB,     DETROIT 
X=  MISCELLANEOUS 

'-°^^ 

■:/-' 

\x^ 

400 

i^^^       A.    > 

Kj 

375 

350 

/O 

<f 

vx 

325 

^^ 

X 

3nn 

A 

1915 

1916 

1917 

1918 

1919 

1920 

1921 

Fig.  49. — Hjrpothetical  curve  showing  the  trend  and  seasonal  fluctuation  of  the 
average  end-point  of  motor  gasohne  in  the  United  States,  191.5-1921,  based 
mainly  on  surveys  made  by  the  U.  S.  Bureau  of  Mines. 

The  character  of  a  given  type  of  gasoline  is  determined  chemically 
b}^  subjecting  a  sample  to  a  standard  method  of  distillation  and  noting 
the  boiling  point  of  the  first  tenth,  the  second  tenth,  and  each  sub- 
sequent tenth  of  the  sample  as  it  distils  off,  with  special  reference  to 
the  initial  point  and  the  end,  or  dry,  point  of  the  process.  The  series 
of  temperatures  so  determined  is  then  plotted  on  cross-section  paper 
as  a  curve  which  gives  a  picture  of  the  volatility  range  of  the  sample. 
This  distillation  curve  expresses  the  character  of  the  gasoline  in  terms 
of  its  suitability  as  motor-fuel,  since  the  initial  point  indicates  the 
readily  vaporized  components  that  determine  the  ease  with  which 
the  engine  may  be  started,  while  the  end-point  measures  the  extent 
to  which  heavy  components  are  present  that  tend  to  pass  through 
the  engine  incompletely  burned.  The  U.  S.  Bureau  of  Mines  makes 
periodic  surveys  of  the  gasoline  supplj',  subjecting  to  distillation 


CHANGING  END-POINT  OF  GASOLINE 


113 


scores  of  samples  collected  in  all  parts  of  the  country;  the  results 
yield  average  curves  for  the  various  sections  of  the  country  and  for 
the  country  as  a  whole  which  permit  the  trend  of  the  supply  to  be 
definitely  determined. 

For  a  number  of  years,  and  particularly  since  1915,  the  end-point 
of  gasoline  has  been  tending  upward,  that  is,  the  volatility  of  gasoline 
has  been  decreasing.  An  indication  of  the  extent  to  which  this  has 
been  taking  place  is  given  in  Table  47,  in  which  the  results  of  distilla- 
tion tests  in  successive  years  are  brought  together. 

Table  47. — The  Rising  End-point  of  Gasoline,  1910-1921 


Year 


1910.    January  *.  .  . 

1915.  Second  half  f 

1916.  April  t 

JulyJ 

September  I . 

1917.  April,  May  §. 
Julyt 

1919.  Aprils 

April,  May  §. 

1920.  January^.  .  . 
Ju\y*J 

1921.  January  II .  .  . 


No.  of 
Samoles 


Locality  of 
Samples 


Typical 


24 


85 

81 
82 

115 


Detroit 
Detroit 
Detroit 

Whole  country 
Detroit 

Leading  cities 
Whole  country 

Leading  cities 
Leading  cities 

Leading  cities 


End-point 


278  F.° 

360°  F. 

300°  F. 
325°  F. 
390°  F. 

394°  F. 
400°  F. 

417°  F. 
423°  F. 

427°  F. 
456°  F. 

429°  F. 


*  F.  H.  Floyd,  Commercial  Gasoline  and  the  Impurities  That  Are  Being  Encountered, 
Soc.  Aut.  Eng.,  Jan.,  1911. 

t  Rittman,  Jacobs,  and  Dean,  Physical  and  Chemical  Properties  of  Gasolines  Sold  through- 
out the  United  States  during  the  Calendar  Year,  1915,  Tech.  Paper,  163,  U.  S.  Bureau 
Mines,  1916. 

t  Automotive  Fuel  Club,  Detroit,  Mich. 

§  Hill  and  Dean,  Quality  of  Gasoline  Marketed  in  the  United  States,  Bull.  191,  U.  S. 
Bureau  of  Mines,  1920. 

^  N.  A.  C.  Smith,  Motor  Gasoline  Survey,  U  S.  Bureau  of  Mines,  Reports  of  Investigations, 
July,  1920. 

[|  N.  A.  C.  Smith,  Third  Semi-annual  Motor  Gasoline  Survey,  U.  S.  Bureau  of  Mines, 
Reports  of  Investigations,  February,  1921. 

The  end-point  figures  given  in  Table  47,  some  of  which  are  aver- 
ages for  the  entire  country,  form  a  basis  for  interpreting  the  change 
in  volatility  of  the  country's  gasoline  supply  over  a  period  of  recent 
years.     The  data  arc  accordingly  interpreted  in  Fig.  49,  which  shows 


114 


GASOLINE 


that  the  end-point  has  been  consistently  rising  between  the  years 
1915  and  1921,  but  with  a  marked  seasonal  fluctuation.  The  sea- 
sonal fluctuation  shown  is  based  partly  on  distillation  data  and  partly 
on  observation  and  inference  as  to  the  seasonal  relation  between 
gasoHne  and  kerosene,  the  peak  of  the  gasoline  demand  coming  in 
late  summer  and  tending  to  draw  the  light  kerosene  ends  into  the 
gasoline  supply,  with  the  peak  of  kerosene  requirements  falling  in 
the  winter  off-season  for  gasoline  and  reversing  the  tendency.  The 
seasonal  variation  is  likewise  suited  to  the  operating  conditions  of  the 
engine,  since  the  heavy  ends  are  more  readilj^  converted  into  power 
under  summer  conditions  than  in  the  winter. 

MILLIONS 

OF 
GALLONS 

600 
500 
400 

300 
250 

200 
150 

100 

Fig.  50. — Trend  of  the  output  of  gasoline  and  kerosene  in  the  United  States  by 
months,  1917-1920,  showing  the  diverging  secular  and  complementary 
seasonal  relationship  between  the  gasoline  and  kerosene  supply.  When  the 
two  curves  are  converging,  the  end-point  of  gasoline  is  declining,  and  when 
the  two  curv^es  are  diverging  the  end-point  of  gasoline  is  rising. 

The  complementary  tendenc}'  in  the  relationship  between  gasoline 
and  kerosene  is  shown  in  Fig.  50,  in  which  the  productions  of  gasoline 
and  kerosene  by  months  for  the  period  1917-1920  are  plotted  on  a 
semi-logarithmic  scale  and  straight  trend  Unes  fitted  to  the  two  curves 
as  a  whole  and  to  the  component  parts  of  the  two  curves.  It  is 
apparent,  in  the  first  place,  bearing  in  mind  that  the  two  products 
are  made  dominantly  from  the  same  raw  material,  that  the  output 
of  gasoline  has  been  increasing  much  more  rapidly  than  the  output  of 
kerosene,  suggesting  the  tendency  for  the  light  kerosene  ends  to  be 
progressively  included  in  the  gasoHne  supply.  In  the  second  place, 
it  may  be  observed  that  the  respective  curves  for  gasoHne  and  kero- 
sene tend  roughly  to  diverge  in  the  spring  and  to  converge  in  the  fall, 
pointing  to  a  seasonal  swing  on  the  part  of  the  fight  kerosene  ends 


\    . 

-^^ 

> 

^ 

GASOLINE/ 

<^ 

y 

\ 

^ 

■^^ 

-r^ 

X 

^/xf< 

K 

A 

/' 
•V 

- 

.=.3^— 

/   KEROSEN 

■\^ 

r^^ 

\ 

. FKT^ 

g3^ — 

^^^ 

y^ 

19 

17 

19 

18 

19 

19 

19 

20 

19 

21 

CHANGING  END-POINT  OF  GASOLINE 


115 


DEGREFS 
CENTIGRADE 
230 


from  kerosene  to  gasoline,  and  back  again  as  the  season  progresses. 
This  seasonal  relationship  is  not  sharply  defined  throughout  the  years 
charted,  but  such  departures  from  this  tendenc}^  as  appear  arise  from 
the  influence  of  the  conditions  of  supply  and  demand,  an  oversupply 
of  gasoline  or  an  undersupply  of  kerosene  tending  to  reverse  the 
normal  seasonal  proclivity.  Thus  in  1919  the  relative  abundance 
of  the  gasoline  supply  coupled  with  the  reopening  of  the  far-eastern 
markets  for  kerosene  injected  counter  forces  that  modified  the 
seasonal  reflex.  On 
the  whole,  however, 
the  various  factors  can 
be  closely  enough 
measured  to  permit 
the  character  of  the 
gasoline  supply  to  be 
projected  ahead  and 
the  end-point  to  be 
anticipated,  yielding 
results  of  practical 
value  to  the  oil  pro- 
ducer and  oil  marketer, 
as  well  as  to  the  in- 
terests concerned  in 
the  design  and  modi- 
fication of  the  auto- 
motive power  plant. 

Thus  far  in  this 
section  emphasis  has 
been  laid  upon  the  be- 
havior of  the  end- 
point,  since  this  char- 
acteristic is  the  key  to 
the    character  of    the 

gasoline  supply.  In  specific  problems,  however,  the  whole  dis- 
tillation curve  is  important,  although  the  various  components  of 
the  supply  display  a  tendency  to  behave  in  conformance  with  the 
change  in  end-point,  as  indicated  in  Fig.  51,  which  shows  the  distilla- 
tion curves  for  the  average  gasoline  in  use  over  a  number  of  years. 

The  cause  of  the  rising  end-point  of  gasoline  does  not  seem  to  be 
comprehended  in  all  quarters.  While  doubtless  the  result  of  attempts 
to  adulterate  the  gasoline  supply  in  some  specific  instances,  the 
change  in  general  is  undoubtedly  an  economic  response  to  a  demand 
that  is  outdistancing  supply  and  forcing  modifications  in  the  char- 


1 

1 

L 

— 

18 

20 

i 

iii\ 

1 

fi 

f  r 

5— 1ii19 

'  / 

T 

I 

/  1 

1 

1 

/ 

1  A 

E— 1' 

17 

} 

/ 

/ 

1 

/ 

/ 

1  1 

/ 

f   U 

1 

315 

/ 

1 

i  1 

/ 

1 

1 

/ 

/ 

1 

1 

1 

/ 

1 

'  / 

/ 

/ 

/ 

/ 

/ 

/ 

/f 

1 , 

'1 

/ 

, 

'/ 

/ 

y 

1 

/ 

^'-  ^ 

/' 

/  / 

/ 

/ 

A 

^  / 

'  / 

// 

/  , 

/ 

/ 

/  / 

/ 

/  • 

/ 

/ 

/. 

i 

1 

1 

1 

\/f 

1 1  / 

1/ 

1 

' 

A 

A 

L 

.. 

DROp'°    ^°  ^°  ^'^  ^°  ®°    ''^   ^°   ^^POi'nT 
PER   CENT   DISTILLED 

Fig.  51. — Trend  of  the  change  in  volatihty  of  gasoUne, 
1915-1920,  showing  the  rise  in  end-point;  after 
R.  E.  Fielder,  Society  of  Automotive  Engineers; 
data  from  U.  S.  Bureau  of  Mines. 


116 


GASOLINE 


INCREMENT   DUE   TO 
RISE    IN    ENDPOINT 


INCREMENT    DUE   TO 
CASINGHEAD    GASOLINE 


INCREMENT    DUE   TO 
CRACKING 


GASOLINE    PRODUCTION 

ON   BASIS   OF  1914 

PRACTICE 


'1914  1916     1917 

Fig.  52. — The  economic  components  of  the  gasoUne  production  of  the  United 

States,  1914-1920. 


acter  of  the  supply 


Fig.  53. — Trend  of  the  gasoline  supply  of  the 
States,  1914-1920,  showing  relative  impor- 
tance of  the  several  components. 


gasoline,   supplemented   in  recent  years 


With  the  end-point  of  1914,  for  example,  the 
gasoline  supply  of  1920 
would  have  fallen  some  10 
per  cent  short  of  meeting 
the  requirements  of  the 
market. 

The  end-point  of  gaso- 
line has  a  fundamental  bear- 
ing upon  automotive  trans- 
portation, which  is  treated 
in  further  detail  in  Chap- 
ter 22. 

Components  of  the  Gaso- 
line Supply. — The  gasoline 
supply,  as  already  noted, 
is  composed  dominantly  of 
natural,  or  straight-run, 
b}^  a  growing  volume  of 


SOURCES  OF   SUPPLY 


117 


TOTAL    OILS    RUN    TO    STILLS  =  19. 5    BILLION    GALLONS 


cracked  gasoline,  casing-head  gasoline,  and  heav\'  ends,  the  last 
mentioned  being  reflected  in  a  rising  end-point.  The  three  sup- 
plementary types  of  gasoUne  develop  in  a  measure  together  since  no 
one  is  marketed  alone  but  goes  into  use  in  blended  form.  Casing- 
head  gasoUne  and  heavy  ends  are  particularly  complementary. 

The  relative  contributions  made  by  the  various  components  of 
the  gasoline  supply  cannot  be  determined  with  close  accuracy, 
because  of  the  absence 
of  exact  statistics;  but  ^^gasoline  [y^ 
an  interpretation  based 
upon  available  figures 
and  estimates,  checked 
by  economic  reasoning, 
is  given  in  Fig.  52,  which 
indicates  the  growing 
degree  to  which  the 
gasoline  supply  is  be- 
coming dependent  upon 
the  supplementary  con- 
tributors. The  same 
data,  converted  into  per- 
centages, are  presented 
in  Fig.  53,  as  emphasiz- 
ing the  trend  of  the  situ- 
ation. 

Sources  of  Supply. — 
The  production  of  gaso- 
line is  fau-ly  well  dis- 
tributed in  reference  to 
the  location  of  demand, 
although  a   considerable 

volume  is  transported  Fig.  54.— The  production  of  gasoline  in  the  United 
from     the    south-central  States  in  1920,  by  refinery  districts, 

states     to     the      more 

populous  areas  to  the  north  and  northeast.  The  quantity 
produced  in  the  various  refinery  districts  of  the  country  in  1918, 
1919,  and  1920,  together  with  the  percentage  yields  in  respect  to  the 
total  oils  run  to  stills,  is  shown  in  Table  48,  the  figures  for  1920  being 
interpreted  graphically  in  Fig.  54. 

Current  Trend  of  Supply  and  Demand. — The  trend  of  the  major 
factors  entering  into  the  interplay  between  supply  and  demand  is 
shown  by  months  for  the  period  1917-1921  in  Fig.  55.  The  data  are 
plotted  on  a  semi-logarithmic,  or  ratio,  scale  in  which  the  slopes  of 


EAST   COAST 


PENN.,  etc. 


ILL.-IND.,  etc. 


KAN.-OKLA.,  etc. 


TEX.- LA.,  etc. 


WYO.-COLO„  eti>. 


1     I     I     i     i     I     i     r    . 

O      lO    20   30   40    5Q   60    70    80    90  lOO^ 
FIGURES    IN    RECTANGLES    ARE    MILLIONS    OF    GALLONS 


118 


GASOLINE 


the  lines  are  proportional  to  the  percentage  changes;  thus  the  various 
factors  charted  are  directly  comparable  and  the  effect  of  a  change  in 
any  one  item  upon  the  other  items  may  be  observed  and  analyzed. 
The  chart  is  presented  not  only  as  an  interpretation  of  current 
developments,  but  as  a  suggested  means  for  keeping  track  of  condi- 
tions ahead,  since  the  data  are  readily  obtainable  from  month  to 
month  for  posting  on  an  original  chart  similarly  designed. 


Table  48. — Production  of  Gasoline  in  the  United  States  by  Refinery 

Districts,  1918-1920 


1918 

1919 

1920 

Produc- 

Per Cent 

Produc- 

Per Cent 

Produc- 

Per Cent 

Refinery  District 

tion  in 

of  Total 

tion  in 

of  Total 

tion  in 

of  Total 

Millions 

Oils 

Millions 

Oils 

Millions 

Oils 

of 

Run  to 

of 

Run  to 

to 

Run  to 

Gallons 

Stills 

Gallons 

Stills 

Gallons 

Stills 

East  Coast 

719 
242 

24.0 

27.8 

780 
270 

22.8 
28.4 

971 

288 

25.2 
29.3 

Pennsylvania 

Illinois,  Indiana .... 

461 

36.5 

571 

34.6 

703 

35.4 

Kansas,  Oklahoma.  . 

865 

29.4 

881 

30.8 

979 

32.2 

Texas,  Louisiana 

637 

17.4 

800 

20.1 

1144 

21.7 

Wyoming 

212 

30.5 

238 

28.4 

301 

30.1 

California 

Total 

434 

12.9 

418 

12.3 

490 

14.4 

3570 

22.6 

3958 

23.0 

4882 

25.0 

The  outstanding  features  of  Fig.  55  are:  The  upward  trend  of 
production;  the  marked  complementary  relationship  between 
domestic  consumption  and  stocks,  reflecting  the  highly  seasonal 
character  of  the  gasoline  demand ;  the  failure  of  the  successive  peaks 
of  the  stocks  curve  to  show  an  upward  trend  paralleling  that  of 
production;  and  the  strongly  fluctuating  character  of  the  exports 
curve. 

A  statistical  summary  of  the  gasoline  situation,  upon  which  Fig.  55 
is  partly  based,  is  given  in  Table  49. 

Relation  of  Production  to  Stocks. — The  size  and  trend  of  pro- 
duction by  months,  compared  with  the  stocks  of  gasoline  on  hand, 
in  the  various  refinery  districts  in  the  United  States  for  1919  and  1920, 
are  shown  graphically  in  Fig.  56  based  on  data  given  in  Table  50. 
The  chart  brings  together  in  one  comparable  view  the  refinery 
statistics  for  gasoline  in  a  form  suitable  for  drawing  deduction  as  to 


RELATION  OF  PRODUCTION  TO  STOCKS 


119 


the  variations  in  supply  and  demand  in  various  parts  of  the  country. 
As  with  Fig.  55,  the  type  of  chart  is  presented  as  a  practical  method 
of  interpreting  a  extensive  range  of  statistics  difficult  to  analyze  in 
tabular  form. 


AV. 

EXPORT 

PR 

:e 

/ 

iVEF 

AGE 

DO 

iHES 

no    PRICE 

,' 

J,      - 

^ 

^> 

-^ 

> 

-^ 

^s  ^! 

— ' 

>^ 

^ 

.^ 

MILLIONS 

OF 
GALLONS 

900 
800 
700 
600 

,' 

,-^ 

/ 

^- 

r^\ 

/ 

\ 

/ 

400 
300 

200 
100 

/           X'STCCKS 

N       1 

'^     \ 

, 

' 

'^ 

r^ 

\/ 

_ 

\ 

/ 

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- 

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^ 

^ 

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cot 

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,  / 

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V 

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V 

19 

17 

19 

18 

19 

19 

195 

>0 

192 

>1 

CENTS  PER 

GALLON 
40 


OR 

DECREASE 

+100^ 
+  80 
+  60 

+  40 

+  20 

0 

-  to 

J- 30 
1-40 
-1-50^ 


Fig.  55. — Trend  of  the  gasoline  situation  in  the  United  States 
by  months,  1917-1921. 


A  notable  feature  of  the  chart  is  the  seasonal  demand  reflected 
by  the  valleys  in  the  curves  for  stocks,  stressing  the  importance  of 
the  seasonal  factor  in  the  marketing  of  gasoline. 

Demand  for  Gasoline. — The  demand  for  gasoline  during  the  past 
decade  has  not  only  grown  tremendously,  but  its  character  has  also 
changed  notably,  in  response  to  the  requirements  of  automotive 


120  GASOLINE 

Table  49. — Summary  of  the  Gasoline  Situation 


Period 


Produc- 
tion, 
Millions 

of 
Gallons 


Stocks,* 
Millions 

of 
Gallons 


Exports, 
Millions 

of 
Gallons 


Domestic 
Consump- 
tion, 
Millions 

of 
Gallons 


Average 
Domestic 
Price 
(Tank- 
wagon), 
Cents 
per  Gallon 


Average 
Export 
Price, 
Cents 

per 
Gallon 


By  years,  1914 
1915 
1916 
1917 

1918 
1919 
1920 


1500 

2059 
2851 

3570 
3958 
4883 


412 

297 
447 
462 


210 

282 
356 
416 

559 
372 
635 


3129 
3436 
4256 


13.0 
11.7 
18.9 
20.6 

21.7 
22.2 
26.5 


12.0 
12.0 
19.3 

22.4 

25.0 
24.7 
27.2 


By  months: 

1919.  January. 
February 
March .  . 


April. 
May. 
June. 


July .  . 

August 

September 

October.  . 
November 
December 


304 
284 
311 

320 
354 
338 

342 
327 
340 

363 
339 
336 


383 
458 
546 

594 
594 
594 

515 
435 
371 

354 

378 
447 


48 
27 

22 

28 
26 
32 

25 
30 
37 

41 
31 
29 


170 

182 
201 

245 
327 
306 

397 

378 
367 

340 

284 
238 


22.5 

22.2 
22.2 

22.2 

22.2 
22.3 

22.2 


22. 
22. 

22. 
22. 

22. 


23.8 
23.6 
24.9 

25.3 
27.0 
24.1 

24.1 
24.8 
25.4 

23.9 
26.0 
24.7 


By  months: 

1920.  January. 
February 
March.  . 


April . 
May. 
June. 


July .  .  . 
August . 
September 

October. . 
November 
December 


337 
323 
367 

356 
381 
415 

423 
444 

454 

466 
453 
464 


516 
563 
626 

644 

578 
504 

413 
323 

288 

301 
355 

462 


31 
32 

47 

44 
69 
69 

82 
59 
40 

65 
40 
65 


237 
244 
257 

295 

378 
420 

432 
475 
449 

388 
359 
292 


23.1 

23.8 
25.1 

25.9 
26.3 
26.8 

26.8 
27.5 
28.2 

28.2 
28.1 
28.0 


23.8 
24.5 
24.6 

28.6 
26.7 
27.0 


27. 
27. 
29. 

28. 
29. 

28. 


By  months: 

1921.  January.. 
February . 
March .  .  . 

April 

May 

June 


460 

572 

55 

295 

27.6 

388 

681 

54 

225 

25.0 

420 

713 

47 

341 

24.0 

426 

747 

57 

335 

23.5 

449 

800 

41 

355 

22.0 

430 

751 

39 

440 

21.4 

30.8 
30.7 
27.4 

26.6 
25.2 
24.0 


♦  End  of  period. 


DEMAND   FOR   GASOLINE 


121 


transportation.  At  the  present  time  the  volume  of  gasoline  consumed 
by  passenger  automobiles,  trucks,  and  tractors,  and  going  into  the 
export  trade,  constitutes  over  90  per  cent  of  the  supply,  the  uses 

STOCKS  ON  HAND       "^"-up^s 


PRODUCTION 


EAST  COAST 


ILL.-IND.  etc. 


KAN.-OKLA.  etc. 


WYO.-COLO.  etc. 


1920 


1919 


1920 


Fig.  56. — Production  and  stocks  of  gasoline  in  the  various  refinery  districts  of  the 
United  States  by  months,  1919-1920. 

once  dominant  for  cleaning,  solvent  purposes,  and  in  chemical  man- 
ufacture, having  been  relegated  to  an  entirely  subordinate  position. 
Measurement  of  the  components  of  the  gasoline  demand  may  be 
made  by  multiplying  the  average  number  of  cars,  trucks,  and  tractors 
in  use  each  year  by  factors  representing  their  respective  average 


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DEMAND   FOR  GASOLINE 


123 


annual  consumption  of  gasoline;  and  subtracting  the  total,  together 
with  the  quantity  exported,  from  the  figures  representing  the  coun- 
try's total  production  which  leaves  a  small  quantity  covering  miscel- 
laneous uses.  The  results  obtained  are  approximations  merely, 
because  the  basic  data  are  imperfect,  but  the  broad  features  of  the 
demand  may  be  drawn  with  sufficient  closeness  to  indicate  its  trend 
and  composition. 

Fig.  57  analyzes  the  trend  of  the  gasohne  demand  for  the  period 
1910-1920  and  is  based  on  registration  figures  for  cars  and  trucks, 
the  best  available  data  for  tractors,  and  the  following  consumption 
factors  (see  Table  51)  modified  somewhat  for  1920. 

Table  51. — Antmual  Consumption  Factors  for  Cars,  Trucks  and  Tractors 


Passenger 
Cars 

Light 
Trucks 

Heavy 
Trucks 

Average 
Trucks 

Tractors 

Av.  annual  consumption 

300  gals. 

1000  gals. 

2000  gals. 

1500  gals. 

2000  gals. 

These  factors  are  based  upon  an  investigation  conducted  by  the 
War  Industries  Board  in  1918,^  modified  by  additional  calculations 
and  experience.  The  factors  cannot  be  accepted  as  exact,  and  indeed 
they  change  from  year  to  year.  Most  factors  generally  used  repre- 
sent a  combined  figure  for  cars  and  trucks.  In  both  1919  and  1920 
the  consumption  factor  for  cars  and  trucks  combined  was  400  gallons 
(domestic  consumption  minus  20  per  cent  for  tractors  and  miscella- 
neous uses,  divided  by  average  number  of  automotive  units  in  use). 
On  this  basis  for  1920,  assuming  7,450,000  cars  and  800,000  trucks 
as  the  average  number  in  use  during  the  year,  the  average  consump- 
tion would  be,  in  gallons  per  year: 


Passenger  Cars 

Trucks 

Combination 

335  gals. 
282  gals. 

1000  gals. 
1500  gals. 

400  gals. 
400  gals. 

Without  going  into  further  detail,  it  may  be  stated  that  the  true 
consumption  factors  of  cars  and  trucks  lie  somewhere  between  the 
limits  of  335  and  282  for  cars,  and  1000  and  1500  for  trucks.  Since, 
however,  there  is  a  tendency  (since  1918)  for  the  annual  mileage  of 
passenger  cars  to  become  greater,  while  the  number  of  light  trucks 

1  M.  J.  Gillen,  Regulation  of  Uses  of  Motor  Cars,  Gasoline,  Rubber  Tires, 
and  Rubber,  War  Industries  Board,  Nov.  4,  1918  (manuscript). 


124 


GASOLINE 


is  increasing  relative  to  heavy  trucks,  the  factors  of  335  gallons  per 
year  for  cars  and  1000  gallons  for  trucks  are  advanced  as  satisfactory 
for  application  to  the  years  immediately  ahead.     In  Figs.  57,  58,  and 


MILLIONS 

OF 
GALLONS 

9,000 
8,000 
7,000 
6,000 
5.,000 

4,000 
3,000 

2,000 

^ 

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^ 

z. 

.^^- 

" 

Vv. 

/  / 

/  / 

300 

20.0 

\50 

100 
90 

'" 

J 

> 

X 

y- 

f/ 

/ 

^ 

/ 

f"/ 

"'^ 

/ 

y 

/y 



^^^^ 

/ 

/ 

/ 

/ 

<^ 

w 

Ay 

^/ 

.^y 

oV 

i^y 

60 
50 

>^^ 

.<f 

'Sv 

o/ 

f 

&' 

^^*4 

3G 

20 
15 

TO 

/ 

CO 

nsumed. 

<^^ 

/ 

/ 

/ 

/ 

INCREASE 

OR 
DECREASE 
+  100;^ 
+  80 
+  60 
40 
J+  20 

O 
10 

]-  20 
J-  30 
40 
J-  50 


19l!l         1912        1913        1914        1915        1916         1917         1918       1919       1920       192) 

Fig.  57. — Trend  of  supply  and  demand  for  gasoline  in  the  United  States, 

1910-1920. 

59  these  factors  are  employed  for  1920,  while  the  factors  given  in 
Table  51  are  used  in  calculating  the  preceding  years,  thus  allowing 
for  the  shifting  currents  in  the  situation. 


DISTRIBUTION  OF  THE   GASOLINE   DEMAND 


125 


Fig.  58  gives  the  data  of  Fig.  57  plotted  so  as  to  show  the  growing 
importance  of  trucks  and  tractors  as  consumers  of  motor-fuel.  The 
demand  chart  may  be  seen  to  be  made  up  of  two  fairly  constant 
components,  exports  and  miscellaneous,  and  three  widening  wedges, 
cars,  trucks,  and  tractors.  The  wedges  representing  truck  and  tractor 
consumption,  it  should  be  observed,  are  in  a  relatively  youthful  stage 
as  compared  with  the  wedge  representing  the  consumption  of  pas- 


1911     1912     1913     1914     1915     1916     1917      1918     1919     1920     1921 


Fig.  58. — Analysis  of  the  growth  in  the  demand  for  gasoline  in  the  United  States, 

1910-1920. 


senger  cars.     The  same  range  of  data,  recalculated  to  a  percentage 
basis,  is  presented  in  Fig.  59  as  a  matter  of  further  comparison. 

Distribution  of  the  Gasoline  Demand. — The  geographical  distri- 
bution of  the  requirements  for  gasoline  may  be  calculated  with 
approximate  acciu'acy  from  automotive  registrations,  and  the  results 
may  be  used  effectively  by  marketing  companies  as  a  guide  to  sales 
development.  Since  the  number  of  cars  and  trucks  in  each  town  and 
county  in  the  country  is  known,  the  calculation  of  the  demand  is 
easily  made  by  means  of  the  consumption  factors  just  given,  modified 
to  meet  local  conditions. 


126 


GASOLINE 


Consumption  factors  for  fourteen  states  of  various  types  and 
diverse  locations  are  given  in  Table  52,  which  at  the  same  time  illus- 
trates the  method  of  calculation. 


Table  52. — The  Consumption  of  Gasoline   in   1920    in  Selected  States, 
Together  with  the  Average  Annual  Consumption  per  Car 


States 

Gasoline 

Consumed,* 

Millions 

of  Gallons 

Average  number  Cars 
and  Trucks  in  Use 

During  1920,t 

Thousands  of  Cars 

and  Trucks 

Average   consump- 
tion per  Unit  (Cars 
and  Trucks).! 
Gallons 

Alabama 

Arkansas              

48.0 
23.9 
51.4 
53.7 
117 

156 
82.4 
74.0 

273 
63.0 

47.6 

66.8 
54.3 

117 
64.7 

247 

54.3 
208 
125 
563 
175 

93.6 
81.5 
113 

91.2 

575 
352 
352 
665 
379 

230 
317 
473 

388 
288 

407 
404 
290 
507 

402 

Colorado 

Florida 

Kansas       

Mississippi 

Nebraska       

North  Carolina 

Ohio        

Oklahoma 

Oregon       

South  Carolina 

South  Dakota 

Tennessee 

Average 

41.2 
41.0 

57.8 

.... 

*  Data  from  American  Petroleum  Institute. 

t  Data  from  Automotive  Industries;  calculated  by  averaging  registrations  of  first  and  last 
of  year. 

t  Calculated  by  discounting  the  annual  consumption  by  20  per  cent  to  allow  for  tractor 
and  miscellaneous  consumption,  and  dividing  the  resultant  by  the  average  number  of  auto- 
motive units  in  use. 


Wide  variations  in  the  consumption  factors  given  are  imme- 
diately noticeable,  and  there  are  certain  discrepancies  difficult  of 
explanation.  For  general  purposes,  the  broad  averages  are  more 
useful  than  the  detailed  figures;  and  the  latter  should  be  used 
with  due  regard  to  the  generalized  data  upon  which  they  are 
based. 

Seasonal  Variation  in  Demand. — The  increased  consumption  of 
gasoline  in  the  summer  months,  because  of  the  greater  use  of  auto- 
mobiles, creates  a  peak-load  problem  for  the  producer  and  marketer 
of  gasoline.     The  gasoline  requirements  of  the  country  are  twice 


SEASONAL   VARTATTDX    IX    DEMAND 


127 


as  great  in  summer  as  in  winter,  reaching  their  maximum  in  August 
and  their  minimum  in  January.  The  summer  consumption  is  greater 
than  the  production,  and  the  requirements  are  met  by  heavA^  drafts 
upon  the  gasohne  stocks  that  accumulate  during  the  winter  and 
spring  months.  The  relation  between  the  seasonal  variation  in 
demand  and  the  course  of  stocks  is  marked,  as  shown  in  Fig.  60, 
which  is  based  on  statistical  data  recalculated  to  a  common  base  in 
January.  The  curv^e 
showing  normal  con- 
sumption is  a  smoothed 
average  and  represents 
the  course  that  demand 
may  be  expected  to 
follow  in  any  given 
year.  The  correspond- 
ing index  numbers,  to- 
gether with  the  percent- 
age of  the  year's  total 
that  each  successive 
month  may  be  expected 
to  require,  are  presented 
in  Table  53. 

As  the  demand  for 
easoline    increases    and    ^^^'  ^^" — Percentage  analysis  of  the  demand  for 

,,  1  c  '         1-  gasoline,  1910-1920. 

the  volume  ot   gasohne 

required    to    meet    the 

summer  demand  grows  larger,  the  handling  of  the  peak-load 
becomes  more  and  more  difficult.  Any  stringency,  or  shortage, 
in  gasoline  that  may  come  is  bound  to  develop  in  the  summer 
season.  A  gasoline  shortage  in  August,  therefore,  does  not  mean 
an  inadequate  production  of  gasoline  so  much  as  an  imetiualized 
load  coming  to  a  focus  in  that  month. 

During  the  period  1918-1920  the  stocks  of  gasoline,  while  trending 
upward  in  an  absolute  sense,  have  not  been  keeping  pace  with  the 
rise  in  production  or  demand.  Fig.  61  shows  the  downward  plunge 
taken  by  the  stock  curve  in  1920  and  reflects  the  growing  difficulty 
ahead  in  meeting  the  climax  in  demand.  A  converging  trend 
between  stocks  and  consumption,  as  shown  in  Fig.  61,  cannot  con- 
tinue without  ultimately  leading  to  a  failure  of  supply  at  the  ]ieak 
season. 


1910  1911   I9I2  1913  1914  1915   1916  1917  19ia  1919  1920  192) 


128 


GASOLINE 


lOO 
90 
80 
70 

60 


NORMAL 

> 

coNsu^ 

IPTI 

ON 

^ 

/ 

/ 

\ 

\, 

^ 

'> 

^ 

-19 

20, 
5CK 

N,  1 

> 

)19 

STO 

CKS 

\ 

1 

918 

STOCKS'iV.!^ 

'--.. 

,---■■ 

'\\ 

* 

\ 

\ 

/ 

,■ 

"^ 

x1 

^1 

JAN. 

FEB. 

MAR. 

APR. 

MAY 

JUNE 

JULY 

AUG. 

SEP. 

OCT, 

NOV. 

DEC. 

SCALE   OP 

INCREASE 

OR    DECREASE 

P-1+iooii 
+  80s£ 

+    60i{ 
+    4Q«S 

+    20Jt 

Of, 

-  10!« 

-  2.0'}, 

-  30^ 
-j—    40^ 

-  50^ 


// 


Fig.  60. — The  seasonal  variation    in   the   demand   for    gasoHne   compared  with 
seasonal  changes  in  the  volume  of  gasoline  in  storage. 


Table  53. — The  Seasonal  Demand  for  Gasoline  in  the  United  States 


,,       ,                                   Index 
Months                            ^.       , 

Numbers 

Percentage  of 
Year's  Total 

January 

February     

100 
108 
120 

135 
160 
185 

210 
220 
195 

165 
147 
125 

5.4 
5.8 

6.4 

7.2 
8.5 
9.9 

11.2 
11.8 
10.4 

8.8 
7.9 
6.7 

March        

May 

June               

July              

August 

September       

October       

November 

December 

100.0 

SEASONAL  VARIATION   IN   DEMAND 


129 


The  significance  of  the  decHning  ratio  of  stocks  to  requirements 
is  further  shown  in  the  following  tabulation : 

Table  54. — The  Significance  of  the  Stocks  of  Gasoline  in  the   United 
States  in  September,  1917-1920 


Sept.,        Sept.. 
1917            1918 

Sept.,         Sept., 
1919            1920 

Ratio  of  stocks  to  domestic  consumption .  .  . 
No.  of  days'  supply  represented  by  stocks.  . 

116% 
35 

85% 
26 

100% 

30 

65% 
19^ 

i 

The  peak-load  problem,  long  recognized  and  aggressively  handled 
in  the  electrical  industry,  is  growing  in  seriousness  in  connection 


-  505J 


Fig.  61. — The  converging  trend  of  gasoline  stocks  and  gasoline  consumption, 
pointing  to  the  growing  difficulty  of  supplying  the  peak  requirements  of 


with  the  supply  of  gasoline.  Gasoline  storage  is  not  developing  as 
rapidly  as  the  peak  of  demand  is  rising,  and  unless  this  relationship 
is  reversed  the  supply  wiU  thin  out  to  a  stringency  in  an  early  summer 
ahead,  even  granted  an  adequacy  of  crude  to  maintain  production. 
Should  a  shortage  of  crude  at  the  same  time  supervene  this  stringency 
will  break  into  a  shortage,  calling  widespread  attention  to  the  situa- 
tion. 


CHAPTER  X 
KEROSENE 

Kerosene,  that  fraction  of  crude  petroleum  intermediate  in 
character  between  gasoline  and  distillate  fuel  oil  (gas  oil),  affords  an 
interesting  example  of  a  product  whose  economic  status  has  been 
profoundly  affected  by  modern  technical  changes  in  fields  impinging 
upon  its  own.  Once  the  mainstay  of  the  oil-refining  industry,  kero- 
sene has  been  relegated  to  a  relatively  subordinate  position,  and 
the  output  of  this  product  in  the  United  States  has  recently  reached 
its  maturity. 

When  the  petroleum  industry  developed  in  the  United  States 
following  the  discovery  well  on  the  Drake  farm  in  Pennsylvania  in 
1859,  a  product  distilled  from  coal  and  known  as  "  coal  oil  "  was  in 
widespread  use  as  an  illmninant.  It  was  soon  found  that  crude 
petroleum,  by  a  process  of  distillation  and  chemical  treatment, 
could  be  made  to  yield  an  illuminating  oil  suitable  for  use  in  lamps. 
For  many  years,  the  efforts  of  the  oil-refining  industry  were  mainly 
devoted  to  the  development  of  kerosene  and  the  extension  of  markets 
for  this  product  with  sufficient  speed  to  give  vent  to  the  mounting 
volume  of  crude  petroleum.  Domestic  markets  alone  proved  inad- 
equate, so  the  foreign  field  was  vigorously  attacked  and  American 
kerosene  was  sent  to  the  four  corners  of  the  globe,  to  lengthen  the 
days  of  the  peoples  of  the  entire  world.  ''  It  would  be  difficult 
indeed  to  estimate  the  value  to  the  world  at  large  of  this  cheap  and 
convenient  source  of  light,  which  has  been  aptly  termed  '  one  of  the 
greatest  of  all  modern  agents  of  civilization.'  " 

The  supply  of  raw  material  for  the  manufacture  of  kerosene  con- 
tinued to  grow  and  toward  the  close  of  the  Nineteenth  Century  the 
commercial  development  of  gas  and  electricity  began  to  narrow  the 
domestic  market,  throwing  still  greater  emphasis  upon  the  impor- 
tance of  expanding  the  foreign  outlet.  In  the  meantime  the  volatile 
components  of  the  crude  petroleum  had  to  be  separated  from  kero- 
sene and  thus  a  supply  of  gasoline  was  being  developed,  without  a 
corresponding  demand,  and  gasoline  for  a  time  became  a  drug  on  the 
market.  Into  this  setting  came  the  commercial  development  of  the 
internal  combustion  engine  and  the  phenomenal  rise  of  automotive 
transportation,  with  results  familiar  to  everyone.     Kerosene   was 

130 


THE   WANING   STATUS  OF   KEROSENE 


131 


soon  forced  to  the  background,  and  gasoline  has  supplanted  kero- 
sene as  the  leading  representative  of  the  joint-products  of  petroleum. 
The  Waning  Status  of  Kerosene. — In  1899  the  output  of  kerosene 
was  58  per  cent  of  the  crude  petroleum  run  to  stills;  while  in  1914 
this  proportion  had  dropped  to  24  per  cent;  and  in  1920  to  12.7  per 
cent.  The  declining  ratio  of  kerosene  output  to  crude  run  is  shown 
for  the  years  for  which  figures  are  available  in  the  following  table : 

Table  55. — Percentage  of  Kerosene  Produced  from  the  Crude  Petroleum 
Run  to  Stills  in  the  United  States,  1899-1920 
Data  from  U.  S.  Census  and  U.  S.  Bureau  of  Mmes 


Year 

Crude  Run  to  Stills, 
Billions  of  Ciallons 

Kerosene  Produced, 
Millions  of  Gallons 

Kerosene  Produced, 

Percentage  of  Crude 

Run 

1899 

2.18 

1259 

58 

1904 

2.81 

1357 

48 

1909 

5.07 

1675 

33 

1914 

8.04 

1935 

24 

1916 

10.4 

1455 

14.0 

1917 

13.2 

1727 

13.1 

1918 

13.7 

1825 

13.3 

1919 

15.2 

2342 

15  4 

1920 

18.2 

2320 

12.7 

VALUE  OF 
PRODUCTION 


1899     1914     1920 


1899     1914      1920 


Fig.  62. 


-The  relative  importance  of  kerosene  compared  with  other  petroleum 
products  in  the  United  States  in  1899,  1914,  and  1920. 

The  value  of  the  kerosene  produced  in  the  United  States,  in  pei 
centages  of  the  value  of  the  total  products  of  the  still,  was  60  per  cent 
in  1899,  24  per  cent  in  1914,  and  approximately  14  per  cent  in   1920. 
The  trend  of  the  i-elative  decline  in  output  and  in  value  of  kerosene 
is  shown  graphically  in  Fig.  02. 


132 


KEROSENE 


Sources  of  Supply. — The  quantity  of  kerosene  produced  in  the 
various  refinery  districts  of  the  United  States  in  1918,  1919,  and  1920, 
together  with  the  percentage  3delds  of  the  total  oils  run  to  stills,  is 
shown  in  Table  56.     (See  also  Fig.  63.) 

Table  50. — Production  of  Kerosene  in  the    United  States  by  Refinery 

Districts,  1918-1920 


Refinery  District 

1918 

1919 

1920 

Produc- 
tion, 
Millions 

of 
Gallons 

Per  Cent 
of  Total 

Oils 
Run  to 

Stills 

Produc- 
tion, 
Millions 

of 
Gallons 

Per  Cent 
of  Total 

Oils 

Run  to 

Stills 

Produc- 
tion, 
Millions 

of 
Gallons 

Per  Cent 
of  Total 

Oils 

Run  to 

Stills 

East  Coast 

Pennsylvania,  etc . . . 
Illinois,  Indiana,  etc. 
Kans.,  Okla.,  etc..  .  . 
Texas,  Louisiana .  .  . 
Wyoming,  Colorado . 
California 

Total 

486 
137 

187 
415 
435 
62.7 
103 

16.2 
15.7 
14.8 
14.1 
11.9 
9.0 
3.1 

703 
191 
217 
393 
569 
65.7 
204 

20.6 
20.0 
13.1 
13.7 
14.3 
7.8 
6.0 

497 
173 
217 
394 
714 
117 
207 

12.9 
17.6 
10.9 
13.0 
13.7 
11.7 
6.0 

1825 

11.6          2342 

1 

13.6 

2320 

11.9 

It  will  be  observed  that  there  is  a  marked  variation  from  year  to 
year  in  the  percentage  yields  of  kerosene.  This  flexibility  reflects 
the  readiness  with  which  the  limits  of  kerosene  are  shifted  under 
varying  economic  conditions,  the  light  ends  of  kerosene  going  into 
gasoline  or  not  as  occasion  demands,  and  the  heavy  ends  being  like- 
wise interchangeable  with  gas  oil.  In  general,  the  year  1919  shows 
much  higher  kerosene  yields  than  do  1918  and  1920,  a  circumstance 
to  be  correlated  with  the  fairly  abundant  supply  of  gasohne  relative 
to  demand  in  1919  and  the  contrary  tightness  of  supply  in  1918 
and  1920. 

Fig.  63  emphasizes  the  importance  of  the  contribution  to  the 
countrj^'s  supply  of  kerosene  made  by  the  south-central  states. 

Relation  to  Gasoline. — The  tendency  over  the  past  few  years  for 
the  light  ends  of  kerosene  to  be  incorporated  into  the  gasoline  supply 
has  been  fully  discussed  in  Chapter  9.  In  addition  to  this  progressive 
transfer  from  year  to  year,  as  the  demand  for  gasoline  mounts,  there 
is  a  seasonal  relationship  within  the  j'ear,  the  kerosene  output  rela- 
tive to  the  quantity  of  oils  run  to  stills  being  in  general  less  in  summer 
than  in  winter.  The  calculations  supporting  this  conclusion  are 
presented  in  Talkie  57. 


RELATION   TO   GASOLINE 


133 


The  degree  of  cor- 
relation between  season 
and  percentage  yield 
of  kerosene  may  be 
effectively  shown  by 
recalculating  Table  57, 
taking  the  jdelds  for 
the  third  quarter  of 
the  year  as  a  base  of 
100.  The  results  of 
such  a  calculation  are 
presented  in  Table  58. 

It  is  apparent  that 
the  kerosene  yields 
bear  a  very  consistent 
and  definite  relation 
to  the  season,  the 
only  exception  being 
offered  by  the  Wyo- 
ming-Colorado refinery 
district.  The  relation- 
ship is  definitely  trace- 
able to  the  demand 
for  gasoline,  which  as 
shown  in  Chapter  IX, 
falls     upon     the    four 


r.:::;.|OTHER  pnoDUCTS 

>i-  ■'•'       AND    LOSSES 


TOTAL   OILS   RUN   TO   STILLS  =19.5   BILLION    GALS. 


nvv 


EAST  COAST 


PENN.,    ETC. 


ILL.  IND.,    ETC. 


KAN.     OKLA.,    ETC. 


WYO.     COLO.,    ETC. 


T^l    \ — i    \ — \    \ — \ — r 

lO    20    30    40    50    60    70    80    90  lQO<( 
FIGURES    IN    RECTANGLES   ARE 
MILLIONS   OF   GALLONS 


Fig.  63. — The  production  of  kerosene  compared 
with  the  production  of  other  petroleum  products 
in  various  parts  of  the  United  States  in  1920. 


Table  57. — Percentage  Yields  of  Kerosene  Relative  to  Total  Oils  Run 
TO  Stills  in  Various  Parts  of  the  United  States  During  the  J^our 
Quarters  of  1920 


Yield  op  Kerosene  in  Percentages  of  Total  Oils  Run  to  Stills 

Refinery  Districts 

First 
Quarter 

Second 
Quarter 

Third 
Quarter 

Fourth 
Quarter 

Year 

East  Coast 

Pennsylvania,  etc. 

111.,  Ind.,  etc 

Kan.,  Okla.,  etc. . 

Tex.,  La 

Wyo.,  Colo.,  etc. . 
California 

Country 

15,7 
18.9 
11.8 
14.4 
15.3 
10.6 
6.6 

13.6 

11.4 

18.0 
10.9 
12.6 
13.2 
13.3 
5.9 

11-6 

10.0 
15.8 

9.6 
10.8 
12.9 
12.1 

5.6 

10.6 

10.2 
17.9 
11.4 
13.8 
13.1 
11.3 
5.9 

11.5 

12.9 

17.6 
10.9 
13.0 
13.7 
11.7 
6.0 

11.9 

134 


KEROSENE 


quarters  of  the  year,  in  percentages  of  the  full  year's  requirement, 
as  follows : 

Ist  Q.  2d  (2.  3d  Q.  4th  Q. 

17.6  per  cent       25.6  per  cent       33.4  per  cent     23.4  per  cent 

Plotting  the  average  gasoline  demand  against  the  average  kero- 
sene yields,  we  get  two  complementary  curves,  as  shown  in  Fig.  64, 
which  reflect  the  seasonal  response  made  by  the  kerosene  supply  to 
the  gasoline  demand.  In  other  words,  in  summer  more  of  the  light 
kerosene  ends  are  introduced  into  the  gasoline  supply  than  in  winter. 
This  tendency  is  in  keeping  with  the  seasonal  variation  in  the  end- 
point  of  gasoline,  as  interpreted  in  Fig.  49,  page  112. 


Table  58. — Yields  of  Kerosene  by  Quarters  of  1920  in  Percentages  of 
THE  Yield  in  the  Third  Quarter  of  the  Year 


Rpfinery  Districts 

First 
Quarter 

Second 
Quarter 

Third 
Quarter 

Fourth 
Quarter 

East  Coast 

157 
120 
123 
133 
119 
88 
118 

128 

114 
114 
114 
127 
102 
110 
105 

110 

100 

100 
100 
100 
100 
100 
100 

100 

102 
113 
119 

128 

101 

94 

105 

109 

Pennsylvania,  etc 

Illinois,  Indiana,  etc 

Kansas,  Oklahoma,  etc .  .  . 

Texas,  Louisiana 

Wyoming,  Colorado,  etc.  . 
California 

Country 

Current  Trend  of  Supply  and  Demand. — The  trend  of  the  major 
factors  entering  into  the  interplay  between  supply  and  demand  is 
shown  by  months  for  the  period  1917-1921  in  Fig.  65,  the  supporting 
data  appearing  in  Talkie  .59.  The  outstanding  features  of  the  chart 
are:  The  horizontal  trend  of  domestic  consumption;  the  high 
ratio  of  exports  to  domestic  consumption;  the  upward  tendency  in 
stocks  on  hand  in  1919  and  1920;  and  the  steady  price  advance  in 
1919-1920  in  particular,  showing  only  a  slight  recession  in  the  fourth 
quarter  of  1920.  Fig.  65  is  presented  as  a  type  of  chart  particularly 
suitable  for  use  in  following  the  current  situation  from  month  to 
month,  and  the  flow  of  the  hues  across  the  page  giving  the  basis  for 
drawing  conclusions  as  to  developments  lying  ahead. 

Relation  of  Production  to  Stocks. — The  size  and  trend  of  pro- 
duction by  months  compared  with  the  stocks  of  kerosene  on  hand 
in  the  various  refinerv  districts  in  the  United  States  for  1919  and  1920 


ANALYSIS  OF   DEMAND 


135 


are  shown  graphically  in  Fig.  66.  The  chart  brings  together  the 
refine  -y  statistics  for  kerosene  in  a  form  suitable  for  drawing  deduc- 
tions as  to  the  variations  in  supply  and  demand  in  various  parts  of 
the  country.  The  type  of  chart  is  presented  as  a  practical  method 
of  interpreting  a  complex  range  of  statistics  difficult  of  analysis  in 
tabular  form.  The  data  on  which  the  chart  is  based  are  given  in 
Table  60. 


4TH   Q. 


Fig.  64. — Seasonal  correlation  between  the  demand  for  gasoline  and  the  yield  of 

kerosene. 


The  outstanding  feature  of  Fig.  66  is  the  large  accumulation  of 
stocks  in  the  East  Coast  and  Texas-Louisiana  districts.  A  con- 
trast is  offered  for  the  year  1920  between  the  declining  production  of 
the  East  Coast  district  and  the  steadily  advancing  output  of  the 
Texas-Louisiana  region. 

Analysis  of  Demand. — The  demand  for  kerosene  is  mainly  for 
purposes  of  illumination  and  heating,  although  of  recent  years  a 
growing  quantity  has  come  under  requisition  for  power  purposes  in 
tractors,  motor-boats,  and  stationary  engines.  The  exact  percent- 
age consumed  for  power  purposes  is  difficult  to  ascertain,  because 
reliable  statistics  on  the  number  of  power  units  in  use  are  not  avail- 
able and  many  appliances  are  designed  to  use  either  gasoline  or 
kerosene.  A  rough  interpretation  of  the  trend  of  demand,  with  no 
pretense  to  exactitude,  is  presented  in  Fig.  67. 

It  will  be  observed  that  export  requirements  have  alwaj's  bulked 
large,  although  foreign  shipments  suffered  serious  curtailment  during 
the  war,  particularly  in  1917  and  1918  when  the  far  eastern  markets 
were  difficult  of  access  because  of  the  shortage  in  shipping.  The 
increase  in  domestic  demand  has  been  slight  compared  with  the  rapid 
rate  at  which  gasoline  requirements  have  grown;  and  much,  if  not  all, 
of  the  recent  increase  has  been  due  to  the  employment  of  kerosene 
for  power  purposes. 


136  KEROSENE 

Table  59. — Summary  of  the  Kerosene  Situation 


Period 


By  years:  1914. 
1915. 
1916. 
1917 

1918. 
1919. 
1920. 


Produc- 
tion, 
Millions 

of 
Gallons 

Stocks,* 

Exports, 

Domestic 
Consump-  | 

Millions 
of 

Millions 
of 

tion, 
Millions 

Gallons 

Gallons 

of 
Gallons 

1935 

1010 

837 

1455 

855 

1727 

498 

658 

1825 

380 

491 

1452 

2342 

339 

979 

1404 

2320 

393 

862 

1404 

Average 
Domestic 
Price 
(Tank- 
wagon) 
Cents  per 
Gallon 


Average 
Export 
Price, 

Cents  per 
Gallon 


7.6 

7.1 
7.9 

8.5 

10.2 
12.7 
17.1 


6.3 
6.0 
6.5 

7.4 


10 
12 
15 


By  months: 

1919.  January. 
February 
March.  . 


April . 
May. 
June. 


July.  . 

August 

September 

October.  . 
November 
December 


159 
164 
170 

183 
190 
179 

206 
220 
199 

227 
215 
229 


332 
303 
295 

276 
245 
253 

280 
296 
312 

329 
347 
339 


68 
67 
54 

93 

80 

124 

76 
84 
73 

94 
70 
93 


138 
126 
124 

108 
142 
47.1 

103 
120 
110 

115 
132 
144 


10.9 
10.9 
11  1 

11.4 
11.8 
12.4 

13.3 
13.9 
14.0 

14.3 
14.3 
14.6 


10.0 
11.2 
12.0 

10.8 
12.3 
11.9 

12.0 
12.6 
13.2 

12.6 
14.9 
12.8 


By  months:       j 
1920.  January. 

February 
March .  . 


April . 
May. 
June. 


July. 

August 
September 

October.  . 

November 

December 


196 
195 
191 

184 
181 
174 

172 
189 
199 

214 
215 
211 


328 
330 
335 

376 
419 
421 

411 
379 
379 

384 
399 
393 


81 
76 
80 

68 
57 
62 

59 
75 
63 

70 

81 
90 


127 
116 
107 

74 

81 

110 

124 
146 
135 

140 
119 
127 


15.6 
15.8 
16.3 

16.6 
16.6 
17.0 

17.1 
18.0 
18.2 

17.8 
17.8 
17.8 


13 

4 

13 

7 

13 

9 

14 

7 

17 

2 

17 

1 

16 

5 

16.9 

14 

8 

15 

1 

16 

0 

15 

7 

By  months: 

1921.  January. . 
February . 
March.  .  . 

April 

May 

June 


205 

419 

79 

100 

17.5 

163 

430 

68 

84 

14.9 

169 

446 

64 

89 

14  6 

156 

459 

59 

84 

14.0 

145 

452 

52 

100 

12.6 

142 

435 

64 

95 

.  11.5 

18. 
16 
15 

15 
11 


12.8 


*  End  of  period. 


ANALYSIS  OF  DEMAND 


137 


There  are  many  specialized  uses  to  which  kerosene  is  put,  on 
which  consumption  statistics  are  not  available.  One  of  the  most 
interesting  of  these  uses  is  in  the  tail-lights  on  trains,  where  a  special 
type  of  long  burning  kerosene  is  still  employed  even  when  the  train 


^ 

< 

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RAC 

E   D 

OME 

STIC 

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> 

^ 

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AV. 

EXF 

ORT 

PR 

CE 

^ 

-^ 

MILLIONS 

^ 

-' 

' 

^ 

600 
500 
400 

300 
200 

lOO 
90 

,.-^^ 

"\ 

-*** 

v,^ 

,,- 

- 

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../ 

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S  _ 

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r^ 

V 

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PR 

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CTK 

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DC 

MES 

TIC 

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IPTl 

/  ^ 
/ 

/ 

DN 
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V 

s 

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\i' 

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',       ( 

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\y\ 

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60 

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V 

V 

J 

^\ 

L 

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'OR- 

s 

19 

17 

19 

18 

19 

19 

19 

20 

19 

21 

Fig.  6.5. — Trend  of  the  kerosene  situation  in  the  United  States  by  months, 

1917-1921. 


is  otherwise  illuminated  with  gas  or  electricity.  The  persistence  of 
kerosene  in  this  connection  illustrates  the  fundamental  importance  of 
form  value,  since  the  cardinal  requirement  is  dependability  under 
any  emergency,  to  which  the  form  of  kerosene  is  better  adapted 
than  either  gas  or  electricity. 


138 


I^ROSENE 


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Q 


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m 
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M 
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CO 
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o 


NM(N      <N!Ncc      roccrj 


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1(3  tOt^       XOr^       OlMOs       (M.-<C^       -I" 
.-irHi-(       »-<i-i^       <NIN>-i       <N<MIN       CO 


<c<n£>      T-icc;o      T)i(No 


c^irco      -rt^O      o  —  -.c; 


OOC<5       -h:<3-*       O-O-"! 


OO—i 


OXO       "-iTjft^.       INi-icO       MX'* 


cc  cc  o 


t^  O  O       lO 


•-H-*iO       C<1(N05       t>-X"-l       M05<N 
t^Nod       COIN'*       OOlMO       o6'>l<'0       CS 


Ti<iOiO       iO»0  lO       CO 


XM05       XOeO       •Ht^oi       CO^-^ 
h-'l'CO       i-co>-i       C0t»iiO       OCSIM 


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ooco     ^roo 


XiO^       TO 

CO  cc  CO      05 


lOCOO       Ot^cO       OMCO       CSL't^ 

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■>i<oo     OO'*      ■fj<  CO      cococo 


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THE  CHANGING   CHARACTER  OF  KEROSENE 


139 


The  Changing  Character  of  Kerosene. — The  major  use  of  kero- 
sene is  for  lighting  and  in  the  early  days  of  its  development  constant 


GALLONS 

lOO 


50. 

25 


50r 

o' 

50r 
O' 


loo 

50 


50ri 

25 

O 


PRODUCTION 


1919 


zjza  ^s  ^  as;  Z^  ^  ^ 


1920 


STOCKS  ON  HAND 


EAST  COAST 


PENN.,  etc. 


ILL.-IND.,  etc. 


KAN.-OKLA.,  etc. 


WYO. -COLO.,  etc. 


1919 


1920 


50 
O 


50 

25 

o 

50 

25 

O 

50 

25 

O 

n25o 

200 
i  150 

lOO 


50 

25 


50 

H  25 
O 


Fi(i.  ()<). — rroduction  and  stocks  of  kerosene  in  the  various  refinery  districts  of 
tlie  United  States,  by  months,  1919-1920. 

effort  was  expended  upon  obtaining  a  product  with  requisite  wick- 
climbing  properties.  Even  in  testing  the  commercial  product  to-day, 
no  chemical  examination  has  succeeded  in  replacing  the  practical 


140 


KEROSENE 


test  in  a  lamp.  No  end  of  ingenious  work  has  also  been  devoted  to 
perfecting  the  kerosene  lamp,  so  that  to-day  we  have  a  delicately 
adjusted  balance  between  the  physical  properties  of  the  fuel,  on  the 
one  hand,  and  the  mechanical  properties  of  the  appliance,  on  the 
other.  Of  late  years,  however,  the  shift  of  the  light  kerosene  ends 
into  the  gasoline  supply,  together  with  certain  compensating  changes 
at  the  heavy  end  of  the  series,  has  somewhat  disturbed  the  balance 
and  created  new  problems  in  the  manufacture  of  kerosene. 


2500 


Z'ODO 


1500 


TOOO 


1909  1914  1917   1918   1919  1920 

Fig.  67.^ — Analysis  of  the  demand  for  kerosene,  1909-1920. 


If  the  demand  for  gasoline  dictates  still  deeper  cuts  into  the  crude, 
causing  further  encroachment  upon  the  light  kerosene  ends,  a  point 
will  soon  be  reached  when  the  supply  will  be  thrown  out  of  adjust- 
ment with  the  whole  range  of  appliances  to  which  it  is  now  comple- 
mentar3\  Here  again,  therefore,  we*have  a  curious  example  of  how 
shifting  economic  currents  critically  affect  the  mechanical  details  of 
technical  developments. 

The  Future  of  Kerosene. — The  demand  for  motor-fuel  is  so  in- 
sistent that  it  is  already  encroaching  upon  the  supply  of  kerosene, 
both  directly  and  indirectly — directly  by  the  development  of  engines 
designed  to  burn  kerosene,  and  indirectly  by  the  blending  of  light 
kerosene  ends  with  the  gasoline  supply.     Much  attention  has  also 


THE   FUTURE  OF   KEROSENE  141 

been  devoted  to  cracking  kerosene  into  gasoline,   although   com- 
mercial success  has  not  yet  been  attained  in  this  direction. 

The  future  requirements  for  motor-fuel  loom  so  large  that  it 
seems  inevitable  that  kerosene  should  be  still  further  encroached 
upon.  Whether  this  tendency  will  proceed  to  the  point  of  com- 
pletely extinguishing  the  product  as  an  illuminating  agent  cannot 
wholly  be  foreseen,  although  it  would  not  be  entirely  unexpected  if 
this  product  some  years  hence  should  be  known  as  "  the  light  that 
failed."  Over  against  this  contingency,  however,  must  be  placed 
the  social  importance  of  kerosene  to  the  farm  and  rural  community; 
and  while  the  economic  pressure  of  rising  price  will  tend  to  divert 
it  from  this  social  role,  counter  forces  of  a  politico-economic  nature 
may  set  up  adequate  defense  to  save  a  modicum  of  supply  from  utter 
extinction. 


CHAPTER   XI 


FUEL  OIL 


In  ail  economic  sen.se,  fuel  oil  is  the  residue  left  over  from  the 

country's  supply  of  crude  petroleum  after  other  demands  are  satisfied. 

MILLIONS  This  product    comprises 

three  varieties :  Crude 
used  as  such;  residuum 
fuel  oil  derived  mainly 
from  skimming  and  top- 
ping refineries;  and  dis- 
tillate fuel  oil,  or  gas  oil, 
turned  out  chiefly  by  in- 
termediate and  complete- 
run  refineries.  The  rela- 
tive proportions  of  these 
three  types  carry  consid- 
eralile  significance  in  re- 
spect to  the  future  course 
of  this  commodity.  A 
rough  approximation  of 
the  ratio  of  crude  oil 
used  as  such  to  fuel  and 
gas  oil  is  given  in  Fig.  68. 
The  U.S.Bureau  of  Mines 
has  estimated  the  ratio 
of  distillate   fuel    oil    to 


Fig.  68. — The  relation  between  fuel  oil,  other  oil 
products,  and  crude  oil  fuel  in  the  United  States, 
1910-1920. 


residuum  fuel  oil  for  the  year  1918,  as  follows: 

Table  61. — Fuel-oil  Supply  in  1918  by  Types  of  Fuel 


Product 

Millions  of  Barrels 

Per  Cent  of  Total 

Distillate  fuel  oil,  or  gas  oil ...  . 

Light  residuum  fuel  oil 

Heavy  residuum  fuel  oil 

19* 
48 
164 

8 
21 
71 

*  The   American   Gas   Association   estimates  the    1919   output   of   distillate   gas   oil   to    be 
30  million  barrels,  as  likewise  does  the  Census  of  Manufactures  for  1919. 

142 


SOURCES  OF   FUEL  OIL 


143 


]GAS   &    FUEL 
1  OIL 


AND    LOSSES 


TOTAL   OILS   RUN   TO   STILLS  =  19.5    BILLION    GALLONS 


EAST   COAST 


PENN.  ETC. 


ILL.  IND.  ETC. 


KAN.  OKLA.  ETC. 


It  will  be  observed  from  these  proportions,  which  have  not  greatly- 
changed  since  1918,  that  residuum  fuel  oil  overwhelmingly  predom- 
inates over  distillate  fuel  oil,  with  the  heavy  variety  of  residuum  in 
striking  excess  of  the  light.  Fig.  68  and  the  table  above  emphasize 
the  residual  character  of  fuel  oil,  which  suggests  why  this  product 
has  so  characteristically 
commanded  a  low  price 
and  suffered  wide  fluctu- 
ations in  market  value. 

Sources  of  Fuel  Oil. — 
Fig.  69  compares  the  out- 
put of  fuel  oil  with  the 
production  of  other  oil 
products  in  various  parts 
of  the  country  in  1920. 
It  will  be  noted  that  the 
refineries  of  the  East 
Coast,  of  Oklahoma- 
Kansas,  of  Texas-Louisi- 
ana, and  of  California 
represent  the  dominant 
sources  of  this  product. 
Leaving  the  California 
output  to  one  side, 
since  the  Far  West  and 
exports  consume  the 
fuel-oil  of  that  state, 
the  oil  fuel  available  to 
the  rest  of  the  LTnited 
States  is  seen  to  be 
derived  almost  entirely 
from  refineries  on  the 
East  Coast    and   in  the 

south-central  portion  of  the  country.  The  rapid  development  of 
the  oil-fields  of  the  Mid-Continent,  the  Gulf  Coast,  and  Mexico 
is  directly  responsible  for  this  grouping  of  production,  since 
crude  petroleum  has  thereby  been  made  available  in  advance 
of  the  higher  types  of  requirements  and  in  consequence  the 
major  portion  has  been  forced  to  find  an  outlet  for  the  time  being 
in  the  only  available  direction — as  steam  raising  fuel  in  competition 
with  coal.  This  outcome  has  also  been  accentuated  by  the  growing 
prominence  of  heavy^  asphaltic  crudes  in  the  country's  supply,  a 
type  of  raw  material  ill  adapted  to  yielding  at  once  high  percentages 


WYO.-COLO.  ETC, 


CALIF. 


!      '      '      1     "1 1 T 

lO    20    30    40    50    60    70    80    90  1003 
FIGURES    IN    RECTANGLES   ARE   MILLIONS   OF   GALLONS 

Fig.  69. — The  production  of  gas  and  fuel  oil 
compared  with  the  production  of  other  petro- 
leum products  in  various  parts  of  the  United 
States  in  1920. 


144 


FUEL  OIL 


of  the  more  desirable  oil  products  by  means  of  the  technology  devel- 
oped for  treating  the  lighter  oils.  To  a  notable  degree,  fuel  oil  is  the 
accompaniment  of  oil-field  development  in  advance  of  adjustments 
in  demands  and  in  refining  technology. 

The  output  and  percentage  yield  (with  reference  to  the  total 
volume  of  oil  distilled)  of  fuel  and  gas  oil  ^  in  the  various  refinery 
districts  of  the  United  States  for  1918,  1919,  and  1920  are  shown  in 
the  following  table: 


Table  62. 


-Production  axd  Percentage  Yield  of  Fuel  and  Gas  Oil  in  the 
United  States  by  Refinery  Districts,  1918-1920 


Refinery  District 

1918 

1919 

■ 

1920 

Produc- 

Per Cent 

Produc- 

Per Cent 

Produc- 

Per Cent 

tion, 

of  Total 

tion, 

of  Total 

tion, 

of  Total 

Millions 

Oil 

Millions 

Oil 

Millions 

Oil 

of 

Run  to 

of 

Run  to 

of 

Run  to 

Gallo-s 

Stills 

Gallons 

stills 

Gallons 

Stills 

East  Coast 

1119 

37.3 

1226 

35.9 

1941 

50.3 

Pennsylvania,  etc..  . 

202 

23.2 

169 

17.8 

208 

21.1 

Illinois,  Indiana,  etc. 

344 

27.2 

408 

24.8 

564 

28.4 

Kan.,  Okla.,  etc.  .  .  . 

1344 

45.6 

1259 

44.0 

1337 

44.0 

Texas,  Louisiana .  .  . 

1934 

52.9 

1912 

48.1 

2392 

45.9 

Wyoming,  Colorado. 

244 

35.1 

280 

33.4 

213 

21.3 

California 

Total 

2138 

63.6 

2300 

67.7 

2206 

63.8 

7321 

46.3 

7627 

44.3 

8861 

45.5 

It  will  be  observed  that  while  the  percentages  of  oils  distilled 
that  were  turned  into  fuel  and  gas  oil  have  remained  fairly  constant 
over  the  three-year  period  for  the  country  as  a  whole,  marked  changes 
have  taken  place  in  several  of  the  refinery  districts.  For  example  the 
East  Coast  refinery  district  shows  a  jump  from  a  35.9  per  cent  yield 
in  1919  to  a  50.3  per  cent  yield  in  1920,  an  advance  attributable  to 
the  great  volume  of  Mexican  crude  subjected  to  topping  in  the 
latter  year;  while  the  Texas-Louisiana  and  Wyoming-Colorado  dis- 
tricts show  a  steady  dechne  from  1918,  a  change  arising  from  the 
growth  of  complete-run  refineries  on  the  Gulf  Coast  and  of  cracking 
installations  for  converting  fuel  oil  into  gasoline  in  Wyoming.  With 
a  curtailed  supply  of  crude  and  a  mounting  demand  for  hght  dis- 
tillates, the  average  percentage  yield  for  the  country  as  a  whole  will 
ultimately  tend  significantly  downward. 

'  In  the  official  statistics,  ga.s  oil  and  fuel  oil  are  not  separately  reported. 


RELATION   TO   REFINERY    PRACTICE  145 

Relation  to  Refinery  Practice. — There  are  four  connected  and 
overlapping  stages  in  the  evolution  of  refinery  practice  in  the  United 
States,  through  which  the  older  producing  fields  of  the  country  have 
entirely  passed  and  tlirougli  one  or  tlie  otlier  stages  of  which  the 
newer  fields  are  now  progressing.  Thus  the  crude  petroleum  pro- 
duced may  be  (a)  used  as  such,  with  a  modicum  of  preparation;  (b) 
subjected  to  topping  or  skimming  processes,  in  wliich  a  part  of  the 
gasoline  and  kerosene  is  extracted,  leaving  the  dominant  portion  of 
the  crude  as  a  residuum  to  be  used  for  fuel;  (c)  treated  to  more  com- 
plete refining,  in  wliicli  a  larger  number  of  commodity  values,  includ- 
ing lubricants,  are  extracted ;  or  (d)  submitted  to  cracking  refining,  in 
which  not  only  an  approach  to  a  full  extraction  of  commodity  values 
is  made,  but  a  portion  of  the  less  valuable  components  is  subjected 
to  rigorous  treatment  for  conversion  into  more  valuable  products. 

Where  the  crude  is  used  in  the  raw  state,  practically  the  whole 
output  is  fuel  oil.  With  topping  or  skimming  refining  in  its  various 
stages,  from  50  to  over  90  per  cent  of  the  raw  material  is  turned 
out  as  fuel  oil.  With  transition  to  complete  refining,  the  proportion 
of  fuel  oil  becomes  decreasingly  less  and  partly  of  a  superior  quality 
(distillate  gas  oil);  and  when  cracking  refining  is  introduced,  fuel 
oil  (or  rather  its  preferred  variety,  gas  oil)  becomes  in  turn  the  raw 
material  for  further  refining,  and  the  yield  of  fuel  oil  is  cut  down  in 
still  further  degree. 

Topping  and  skimming  plants  go  along  with  flush  conditions  in 
oil-field  development.  They  spring  up  quickly  wherever  the  supply- 
of  crude  petroleum  is  abundant  and  cheap ;  they  require  a  relatively 
small  outlay  of  capital  and  for  a  period  are  profitable,  in  many 
instances  exceedingly  so.  With  high  cost  crude,  however,  they 
become  uneconomic,  and  either  cease  to  operate  or  change  to  plants 
making  a  fuller  extraction  of  values.  Up  to  the  present  the  topping 
and  skimming  capacity  of  the  country,  while  showing  fluctuations  in 
conformance  to  conditions  of  supply  and  demand  in  the  oil  market, 
has  been  increasing,  owing  to  the  upgrowth  of  new  plants  in  excess 
of  the  plants  going  out  of  existence  or  chaiiging  over  to  more  complete 
refineries.  The  development  of  topping  plants  has  also  been  stim- 
ulated by  the  mounting  imports  of  crude  oil  from  Mexico,  although 
many  skimming  plants  were  forced  out  of  existence  in  the  Mid- 
Continent  and  Gulf  regions  under  the  conditions  of  reduced  demand 
that  came  into  play  in  late  1920  and  early  1921.  As  oil-production 
conditions  mature,  however,  the  topping  and  skimming  types  will 
tend  to  give  way  to  complete  refineries  and  the  relative  yields  of  fuel 
oil  will  decline  to  proportions  characteristic  of  such  refinery  districts 
as  Pennsylvania  and  Illinois-Indiana.     (See  Fig.  69.) 


146  FUEL  OIL 

Development  of  Cracking  Refining. — In  response  to  the  expanding 
demand  for  motor-fuel  the  upgrowth  of  cracking  refining  has  been 
conspicuous  since  1915.  In  1920  roughly  15  million  barrels  of  gaso- 
line were  contributed  by  cracking,  over  the  quantity  producible 
without  its  aid.  This  output,  in  turn,  represented  a  consumption 
of  from  30  to  40  million  barrels  of  distillate  fuel  oil,  or  gas  oil.  The 
inevitable  result  of  such  a  large  diversion  of  gas  oil  was  seen  in  the 
1920  shortage  of  this  product  and  the  concurrent  agitation  of  the  gas 
manufacturers  under  this  head. 

The  evident  inability  of  cracking  growth  to  keep  pace  with  the 
increasing  demand  for  motor  oil  has  been  reflected  in  a  change  in 
end-point  of  gasoline,  which  in  turn  has  increased  the  consumption 
of  motor  oil  as  a  result  of  crank-case  dilution.  This  effect  has 
further  stimulated  the  upgrowth  of  complete-run  refining  at  the 
expense  of  skimming  processes.  Thus  another  cycle  of  events  has 
been  tending  in  the  direction  of  curtailment  in  fuel  oil  output.  The 
various  factors  in  the  situation  are  complex,  displaying  many  fluc- 
tuations and  reversals;  but  the  net  changes  are  toward  an  ultimate 
curtailment  in  the  percentage  yield  of  fuel  oil. 

Excessive  Competition  in  Marketing  Fuel  Oil. — In  recent  years, 
the  output  of  fuel  oil  in  the  newly  developed  oil  sections  of  the  country 
has  created  unsettled  marketing  conditions  for  this  product.  Because 
of  the  bulk  in  which  fuel  oil  was  produced,  the  difficulties  of  main- 
taining adequate  storage,  the  seasonal  character  of  the  demand,  and 
other  factors,  keen  competition  in  marketing  resulted.  In  point  of 
fact,  competitive  efforts  in  excess  of  what  was  advantageous  or 
even  necessaiy  were  frequently  in  evidence,  since  lack  of  confidence 
on  the  part  of  refiners  with  storage  tanks  approaching  the  limit  of 
capacity  often  led  to  a  feeling  of  overproduction,  which  resulted  in 
drastic  price  cutting  and  other  measures  destructive  of  profitable 
disposal.  Such  conditions  were  aggravated  also  by  a  periodic  over- 
production of  crude  petroleum,  as  in  the  Gushing  field  in  1915,  in 
the  North  Texas  fields  in  1919,  and  throughout  much  of  the  country 
in  1920-1921. 

As  the  situation  is  shaping  up  ahead,  with  a  dearth  of  crude 
petroleum  and  growing  demands  in  prospect,  the  competitive  condi- 
tions surrounding  the  marketing  of  fuel  oil  will  be  largely  mitigated. 
A  foretaste  of  this  prospect  was  afforded  in  the  winter  of  1917-1918 
under  the  stress  of  war  conditions.  The  reaction  of  1919,  arising 
from  an  overstimulation  of  productive  effort  in  the  face  of  an  imme- 
diate stoppage  in  war  requirements,  was  merely  a  passing  incident. 
In  late  1919  the  influences  outlined  above  come  forward  with  due 
effect  accentuated  by  the  coal  strike  and  by  restrictions  in  transpor- 


TREND   OF   FUEL  OIL  PRODUCTION 


147 


lOO 
90 
80 
70 

60 

SO 


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SCALE  OF 
INCREASE   OR 
DECREASE 
100,1 


2  + 

I  _ 


80^ 

60;? 
40;{ 

20«« 

o^ 
io;« 

20^ 

30;{ 

40!< 
50^ 


1911  1912  1913  1914  1915  1916  1917  1918  1919  I92U 
TREND   OF   PRODUCTION 
ACTUAL    PRODUCTION 


tat  ion  facility.  Again  in 
1920-1921  conditions 
swung  to  the  opposite 
extreme,  when  a  highly 
stimulated  crude  produc- 
tion both  in  this  country 
and  Mexico  found  an  in- 
appropriate economic  set- 
ting in  a  time  of  industrial 
depression.  But  ultunate- 
ly  supply  will  lag  perman- 
ently behind  demand  and 
then  the  whole  country 
may  be  expected  to  exper- 
ience a  growing  scarcity  of 
this  product. 

Trend  of  Fuel  Oil  Pro- 
duction.— T he  rate  at 
which  the  production  of 
fuel  oil  and  gas  oil  has 
been  increasing  in  the 
United  States  during  the 
past  decade,  compared 
with  the  increase  of  gasoline,  kerosene,  and  lubricating  oils,  is  shown 
graphically  on  a  ratio  scale  in  Fig.  70.      It  will  be  observed  that  the 

straight  line  fitted  to  the 
curve  for  fuel  oil  is  steeper 
than  the  trends  of  kerosene 
and  lubricating  oils,  ])ut 
less  steep  than  the  trend 
of  gasoline.  The  relative 
volumes  of  the  four  pro- 
ducts turned  out  diu'ing 
the  same  period  are  de- 
picted in  Fig.  71.  The 
sharp  rise  in  gasoline  de- 
mand (Fig.  70)  is  seen  to 
have  notably  restricted  the 
output  of  kerosene  (Fig. 
71),  and  to  have  begun  to 

_,      ^,     n,,       1  x-  ^-         f  ii     f        exert     a      similar      effect 

Fig.  71. — The  relative  proportions  of  the  four 

princi!)al  petroleum  i)n)(luets  i)rodured  in  the    ^pon     the      production      of 
United  States,  1910-1920.  fuel  oil. 


Fig.  70. — The  relative  growth  in  output  of  the 
four  principal  petroleum  products  in  the 
United  States,  1910-1920. 


1911   1912  1913  1914  1915  1916  1917  1910   1919  1920 


148  FUEL  OIL 

Table  63. — Summary  of  the  Gas  axd  Fuel  Oil  Situation 


Period 


Produc- 
tion, 
Millions 

of 
Gallons 


Stocks,* 
Millions 

of 
Gallons 


Exports, 
Millions 

of 
Gallons 


Domestic 
Consump- 
tion, 
Millions 

of 
Gallons 


Average 
Domestic 

Price, 

Dollars 

per 

Barrel 


Average 
Export 
Price, 
Dollars 

per 
Barrel 


By  years:  1914 
1915 
1916 
1917 

1918 
1919 
1920 


3734 

4664 
6513 

7321 
7627 
8861 


578 

659 
714 

847 


703 

812 

964 

1124 

1201 
618 
847 


6039 
6954 
7891 


0.90 

.72 


,04 
.57 


2.01 
1.59 
2.79 


15 
16 
19 

70 


2.33 
2.22 

2.78 


By  months : 

1919.  January. 
February 
March.  . 


April . 
May. 
June. 


July .  .  . 
August . 
September 

October.  . 

November 

December 


690 
554 
575 

589 
652 
632 

638 
686 
683 

680 
663 

685 


646 
693 
749 

808 
789 
812 

818 
830 
862 

829 
791 
714 


75 
37 
37 

46 
43 
54 

45 
39 
39 

66 
82 
57 


528 
471 

482 

485 
629 
564 

587 
635 
612 

649 
619 
705 


1.88 
1.60 
1.55 

1.44 
1.40 
1.37 


1.44 


1.49 
1.62 
2.53 


2.53 
2.10 
2.31 

2.16 
1.97 
2.15 

2.15 
1.91 

2.08 

2.34 
2.36 
2.14 


By  months: 
1920.  January. 
February 
March.  . 


April . 
May. 
June . 


July .... 
August . . 
September 

October.  . 
November 
December 


618 
590 

687 

643 
707 
690 

751 

834 
837 

823 
823 
859 


652 
590 
580 

591 
619 
642 

655 
709 
771 

799 
809 
837 


75 
52 
68 

78 
70 
68 

79 
59 
60 

93 
65 

84 


605 
600 
629 

554 
609 
599 

659 
721 
714 

703 

748 
747 


2.33 
2.33 

2.88 


3.02 

2.74 
2.44 
2.13 


2.10 
2.05 
2.25 


2.88 
3.31 
3.33 

3.08 
2.96 
3.16 


By  months: 

1921.  January.. 
February . 
March .  .  . 

April 

May 

June 


837 

921 

110 

643 

1.92 

733 

993 

73 

588 

1.44 

758 

1005 

69 

677 

1.39 

813 

1056 

72 

690 

1.39 

817 

1163 

51 

659 

1.23 

826 

1249 

62 

678 

1.08 

26 
36 

85 

48 
52 
09 


*  End  of  period. 


CURRENT  TREND  OF  SUPPLY  AND  DEMAND 


149 


Current  Trend  of  Supply  and  Demand. — The  trend  of  the  major 
factors  entering  into  the  interplay  between  supply  and  demand  is 
shown  by  months  for  the  period  1917-1921  in  Fig.  72,  the  supporting 
data  being  presented  in  Table  63.  The  outstanding  features  of  the 
chart  are:  The  distinctly  complementary  relationship  between  stocks 


COLLARS 
PER   BARREL 
4.00 


Fig.  72.— Trend  of  the  gas  and  fuel  oil  situation  in  the  United  States  by  months, 

1917-1921. 


and  price;  the  tendency  for  production  to  show  a  marked  seasonal 
variation  in  conformance  with  the  demand  for  gasoline;  and  the 
degree  to  which  exports  have  fallen  away  since  1918. 

Relation  of  Production  to  Stocks. — The  size  and  trend  of  pro- 
duction by  months  compared  with  the  stocks  of  fuel  and  gas  oil  on 


150 


FUEL  OIL 


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RELATION   OF   PRODUCTION   TO   STOCKS 


151 


PRODUCTION 


STOCKS   ON    HAND 


''/Mv/y/' 


.V 


/^ 


1919 


^--,^^/:,^ 


1920 


EAST  COAST 
PENN.,  etc. 


ILL.-IND.,  etc. 


KAN.-OKLA.,  etc. 


TEX. -LA.,  etc. 


WYO.-COLO.,  etc. 


.,.,  ,A...„ 


4---^Vt/^.-AV  ■.■/.'"V. 


'919 


v////.  ,--•-■,>/  -///, 


o=: 


1920 


Fig.  73. — Production  and  stocks  of  gas  and  fuel  oil  in  the  various  refinery  districts 
of  the  United  States  by  months,  1919-1920. 


152 


FUEL  OIL 


hand  in  the  various  refinery  districts  in  the  United  States  for  1919 
and  1920  are  shown  graphically  in  Fig.  73,  with  the  supporting  data 
given  in  Table  64.  The  chart  brings  out  the  marked  increase  in 
production  during  1920,  especially  on  the  East  Coast  and  in  Texas- 
Louisiana,  compared  with  a  general  increase  in  stocks  over  the 
same  period.  The  stocks  on  hand  in  California,  however,  display  a 
sharp  departure  from  this  tendency  in  the  latter  part  of  1920. 

Analysis  of  Demand. — Fuel  oil  is  used  mainly  for  fuel  in  the  indus- 
tries and  for  transportation.  Much  of  the  power  employed  in  the 
Pacific  States  and  the  Southwest  is  generated  by  this  liquid  fuel. 
The  East  is  less  dependent  upon  fuel  oil,  although  the  extension  of  its 
use  here  has  also  been  rapid.  The  advantages  of  oil  over  coal  are 
many  and  well  known  (see  Fig.  74)  and  need  not  be  detailed  here. 


Steaming 


Storage 


Evaporation 


Heat  Value 


Freight 


Labor 


Boiler  Capacity 


Deterioration 
and  Ash 


Combustion 


Efficiency 


'Warn    i 


Fiu.  74. — Graphic  comparison  of  the  efficiency  of  coal  and  oU  as  fuel;  after  Tide 

Water  Oil  Company. 

Granted  a  bountiful  supply  at  a  low  price,  its  field  is  as  wide  as  that 
of  coal  itself. 

Fuel  oil  is  the  principal  energy  dependency  of  industry  and 
transportation  in  the  far  West.  The  absence  of  an  adequate 
supply  and  the  relatively  high  price  of  coal  make  fuel  oil  a  highly 
important  factor  in  the  entire  Pacific  coast  region.  An  adequate 
supply  of  petroleum  is  probably  of  greater  importance  for  the  Pacific 
Coast  than  for  any  other  section  of  the  country,  as  it  constitutes 
the  principal  or  only  source  of  fuel  for  heating  purposes,  marine 
and  river  navigation,  railways,  public  utilities,  and  for  mining  and 
manufacturing  activities  (see  Fig.  75).  The  petroleum  industry 
of  California  supplies  most  of  the  fuel  needs  of  Arizona,  California, 
Nevada,  Oregon,  and  Washington  (see  Fig.  76).  The  extent  of  the 
far-western  dependency  upon  an  exhaustible  resource  has  turned 
active  attention  to  the  development  of  water-power  in  this  region, 


DEMAND   BY   MARINE   TRANSPORTATION 


153 


and  hydroelectric  installations  have  not  only  greatly  increased  in 
recent  years  but  would  appear  to  offer  the  principal  avenue  of  relief 
to  the  eventual  decline  of  California's  oil-fields. 

Detailed  information  on  the  consumption  of  fuel  oil  in  the  rest 
of  the  country  is  wanting,  but  a  rough  division  of  the  supply  into 
principal  uses  is  shown  in  Fig.  77,  prepared  from  data  for  1918.^ 
It  will  be  of  interest  to  appraise  the  trend  of  the  most  important 
demands,  having  in  mind  that  if  the  supply  proves  inadequate 
requirements  of  lower  economic  standing  will  have  to  go  b}'^  default 
in  favor  of  those  of  higher  economic  rank. 


STEAMSHIPS 


PUBLIC   UTILITIES 


MINING  &   SMELTING 


INDUSTRIES 


ALL  OTHERS 


Fig.  75. — Utilization  of  California  fuel  oil  in  1917  by  territories  and  types  of 
uses;   data  from  California  State  Council  of  Defense. 


Demand  by  Marine  Transportation. — The  mei-chant  shipping  of 
the  world  is  rapidly  turning  to  h\v\  oil  as  a  source  of  power.  The 
advantages  to  be  derived  from  liquid  fuel  in  the  place  of  coal  are  so 
outstanding  in  facilitating  bunkering,  increasing  the  radius  of  steam- 
ing, and  conserving  labor  in  firing,  that  this  trend  will  undoubtedly 
increase  rapidly,  especially  in  view  of  the  highly  competitive  situa- 
tion developing  between  the  merchant  marines  of  Great  Britain  and 
the  United  States.  The  shift  from  coal  to  oil  in  the  marine  field  has 
been  spectacular.  The  new  construction  in  shipping  occasioned 
by  the  submarine  ravages  during  the  war  has  served  to  accentuate 
'  Kindly  supplied  by  G.  B.  Richardson,  U.  S.  Geological  Survey. 


154 


FUEL  OIL 


Fig.  76. — Distribution  of  California  fuel  oil  in  the  western  states;  after  California 
State  Council  of  Defense. 


DEMAND  BY  ]VL\IIINE  TRANSPORTATION 


155 


the  change.  At  the  beginning  of  1921  the  world's  merchant  shipping 
approximated  55  million  tons.  Of  this  tonnage,  around  9  milHon 
tons  is  alread}^  on  an  oil-burning  basis,  of  which  nearly  a  million  tons 
is  fitted  with  Diesel  engines.  Expressed  in  terms  of  oil,  this  shipping 
when  fully  employed  represents  an  annual  fuel  oil  demand  of  approx- 
imately 90  million  barrels.  The  rate  of  change  from  coal  to  oil  may 
be  judged  from  the  fact  that  of  the  total  world  tonnage  in  1918-1919, 


PRODUCTION 


CONSUMPTION 


;S 

CRUDE 

1  43  1     v/; 

USED  AS   FUEL 

17:; 

) 

GAS   &   FUEL 

OIL 

MARKETED 

BY 

REFINERIES 

,24'. 


EXPORTLD 


BUNKER   OIL 


MERCHANT   MARINE 
(1919) 


PACIFIC  COAST   R.R. 


n2]  vX--      OTHER    RAILROADS 

5  ^^H     OILFIELD    FUEL 


GAS  OIL    USED   IN 
GAS    MANUFACTURE 


INDUSTRIES   WEST  OF 
ROCKIES 


INDUSTRIES    EAST  OF 
ROCKIES 


Figures  are  Millions  of  Barrels. 

Fig.  77. — Consumption  of  fuel  oil  iu  the  United  States  in  1918  by  tj^ies  of  uses. 


12  per  cent  was  fitted  to  use  oil,  while  in  the  following  year  the  pro- 
portion had  increased  to  18  per  cent.     (See  Table  65.) 

The  shift  from  coal  to  oil  is  being  accomplished  in  two  directions: 
By  the  conversion  of  coal-burners  to  oil-burners,  and  through  the  con- 
struction of  motor  vessels.  The  second  aspect  of  the  situation  is 
just  beginning  to  come  effoctivety  into  Ijearing  in  the  United  States; 
but  construction  of  motor  ships  in  Great  Britain  and  on  the  conti- 
nent of  Europe  is  proceeding  apace.  While  the  motor  ship  using 
oil  has  a  strong  advantage  over  the  oil-fired  steamer  in  point  of 


156 


FUEL  OIL 


economy,  evidently  much  of  the  world's  shipping  will  make  the  transi- 
tion to  oil  through  an  intermediate  stage  of  oil  firing,  which  means 
for  the  present  that  10  million  barrels  of  fuel  oil  may  be  roughly 
estimated  as  the  requirement  of  each  million  tons  of  shipping  depend- 
ent upon  oil. 

Table  65. — Classification  of  the  World's  Tonnage  of  Shipping   by  Types 

OF  Fuel 

Data  from  Lloyd's  Register  of  Shipping,  1919-1920  * 


1918-19, 
Per  Cent 


1919-20, 
Per  Cent 


Coal  as  fuel 

Fitted  to  use  oil  fuel  for  boilers 

Fitted  to  use  oU  in  internal-combustion 

engines 

Sail  power  only 


82 
10.5 

1.5 
6 


76 
16.3 

1.7 

6 


100 


100 


*  Compiled  by  The  Naval  Annual,  1920-1921,  London,  p.  180. 

An  analysis  of  the  vessels  turned  out  and  under  construction  by 
the  U.  S.  Shipping  Board  shows  that  the  merchant  marine  of  the 
United  States  is  substantially  on  an  oil-burning  basis,  as  indicated 
by  Table  66.  The  commitment  of  the  Shipping  Board  to  an  oil- 
fired  pohcy  has  already  had  a  marked  effect  upon  the  fuel  oil  market. 
The  requirements  of  the  Board  in  1920  were  upwards  of  30  million 
barrels.  And  while  the  industrial  depression  of  1920-1921  greatly 
curtailed  this  demand,  the  vigorous  resumption  of  international 
trade  may  be  expected  to  revive  and  intensify  the  fuel  requirements 
in  the  marine  field. 

Table  66. — Tonnage  Produced  and  under  Construction  by  U.  S.  Shipping 
Board,  November,  1920  * 


Constructed, 
in  Thousands 
of  D.  W.  T. 

Under  Con- 
struction, in 
Thousands 
of  D.  W.  T. 

Total, 
in  Thousands 
of  D.  W.  T. 

Per  Cent 

Oil-burners          

4159 
2141 
2245 

422 

18 
283 

9269 
4581 
2159 

49.4 

23.3 
27.3 

Coal-burners 

Coal  or  oil  (convertible) .  . 
Total      

8544                     724                  2,528         1   100  0 

Data  from  U.  S.  Shipping  Board. 


DEMAND   BY   RAILROAD   TRANSPORTATION 


157 


In  recent  years  there  has  been  a  rapid  growth  in  the  quantity  of 
fuel  oil  laden  on  vessels  engaged  in  foreign  trade,  which  increased 
from  14  million  barrels  in  1919  to  26  million  barrels  in  1920.  A  con- 
siderable portion  of  the  total  was  used  by  vessels  flying  foreign  flags 
and  in  a  sense  constituted  foreign  shipments.  Data  covering  the 
quantity  and  price  of  this  oil  in  1919  and  1920  by  important  groups  of 
ports  appear  in  Table  67. 

Table  67. — Quantity  and  Value  of  Bunker  Oil  Laden  at  U.  S.  Ports  on 
Vessels  Engaged  in  Foreign  Trade  in  1919  and  1920 

Data  from  U.  S.  Bureau  of  Foreign  and  Domestic  Commerce 


Quantity, 
Millions  of  Barrels 

Value, 
Dollars  per  Barrel 

1919 

1920 

1919 

1920 

Atlantic  Coast  ports 

Gulf  Coast  ports 

8.41 
2.32 

3.29 

16,7 
3.95 
5.64 

2.37 
1.67 
1.69 

2.80 
2.37 
1.86 

Pacific  Coast  ports 

AllU.S.  ports 

14.0 

26.3 

2.09 

2.53 

In  addition  to  the  merchant  shipping  requiring  oil,  the  navies  of 
the  world  are  alread}"  largely  on  an  oil-burning  basis.  The  advan- 
tages of  oil  over  coal  for  naval  operations  are  too  outstanding  to  be 
denied.  While  the  naval  demand  is  small  in  comparison  with  the 
requirements  of  merchant  shipping,  about  5  million  barrels  annually 
for  the  American  Navy,  this  demand  is  a  most  insistent  one  and  must 
be  met  irrespective  of  price. 

On  the  whole,  it  is  evident  that  oil  for  merchant  marine  transpor- 
tation has  assumed  important  proportions,  and  the  strength  of  this 
demand  is  such  that  if  necessary  it  can  divert  fi'om  industrial  pur- 
poses the  quantity  needed  for  shipping  requirements. 

Demand  by  Railroad  Transportation. — Fuel  oil  is  used  in  large 
quantities  by  the  railroads  of  the  United  States;  and  in  the  Far  West 
railwa}^  transportation  is  largely  dependent  upon  this  fuel.  The 
geographical  distribution  of  the  railroad  demand  for  fuel  oil  is  shown 
in  Table  68,  while  the  growth  in  the  demand  from  1909  to  1920  is 
indicated  in  Table  69.  The  advantages  of  oil  over  coal  for  railway 
transportation  are  not  so  outstanding  as  with  marine  transportation. 
Yet  sufficient  advantage  is  present  to  make  it  probable  that  in  event 
of  shortage  the  railway  demand  will  rank  distinctly  above  industrial 
demand  in  the  price  it  can  afford  to  pay  for  oil  fuel  in  competition 


158 


FUEL  OIL 


with  coal.  In  this  general  connection  it  should  be  borne  in  mind 
that  motor  locomotives  are  a  possibihty,  but  their  development 
would  serve  merely  to  raise  the  status  of  the  demand,  as  is  true  in 
the  matter  of  motor  ships. 

Table  68. — Distkihution  of  the   Kailw.w   Dkmand  for  Fuel  Oil  in  the 
United  States  in   1919  and   1920 

Data  from  Amcirican  Petroleum  Institute 

{In  millimifi  of  barrels) 


Section                                                           1919                                   1920 

Eastern I              0.12 

Southern |              0.87 

Middle  West  and  Southwest '            11 .6 

0.03 
1.03 
15.6 
20.6 
4.45 

Southwestern  Pacific 18. 1 

Northwestern 4 .  52 

Total 35.2 

41.8 

Table  69. — Growth  in  the  Con.su.mptiox  of  FielOil  by  American  Railroads, 

1909-1920 

Data  from  U.  S.  Geological  Survey  and  American  Petroleum  Institute 

(In  millions  of  barrels) 


1909 

19.9 

1910 

23.8 

1911 

29.7 

1912 

33.6 

1913 

33.0 

1914 

31.1 

1915 

32.8 

1916 

38.2 

1917 

42.2 

1918 

36.7 

1919 

35.2 

1920 

41.8 

Demand  by  Public  Utility  Power  Plants. — Public  utility  power 
plants  in  the  United  States  consumed  1.'^  million  barrels  of  fuel  oil 
in  the  production  of  electricity  in  1920,  as  compared  with  11  million 
barrels  in  1919.  The  geographical  distribution  of  this  consumption 
is  shown  in  Table  70, 


DEMAND   BY  AUTOMOTIVE  TRANSPORTATION 


159 


Table  70. — Consumption  of  Fuel  Oil  by  Public  Utility  Power  Plants  in 

THE  United  States  During  1920,  by  States 

Data  from  U.  S.  Geological  Survey 

{In  thousands  of  barrels) 


California 

Texas 

5625 

2883 
821 
631 

488 
449 
346 
321 

312 
239 
153 
143 

Mississippi 

Alabama 

Arkansas 

Wvomine 

110 
97 

84 
82 

80 
39 
31 
26 

25  1 
24  ' 

Kansas 

Florida 

Louisiana 

Missouri 

Oklahoma 

Rhode  Island 

Nebraska 

New  York 

Maine 

Connecticut 

South  Dakota 

Oregon 

Georgia 

Arizona 

Massachusetts 

Washington 

Others 

73 

Total 

13,082  j 

Demand  by  Automotive  Transportation. — Up  to  the  present 
automotive  transportation  has  been  supported  almost  exclusively 
by  the  volatile  products  of  the  petroleum  industry.  An  increasing 
quantity  of  distillate  fuel  oil,  however,  is  now  converted  into  gaso- 
line, and  this  item  will  continue  to  enlai'ge  and  make  growing  inroads 
upon  the  fuel  oil  supply.  In  addition,  internal  combustion  engines 
using  superior  grades  of  fuel  oil  are  coming  into  play,  and  a  significant 
portion  of  the  heavy  traction  element  of  automotive  transporta- 
tion may  ultimately  pass  substantially  to  a  heavy-oil  basis.  Oil 
refiners  are  already  meeting  this  tendency  with  the  production  of 
special  distillates  designed  for  internal  combustion  engines  of  the 
injection  type.  Once  under  full  swing  the  heavy-oil  automotive 
engine  may  come  to  represent  a  very  large  requirement.  The 
fuel  oil  supply  is  thus  under  requisition  in  two  directions  as  a 
source  of  motor-fuel,  and  so  insistent  may  such  demands  be  expected 
to  become  in  the  futm-e,  that  the  product  will  gradually  be  diverted 
from  most  of  its  present  applications  and  brought  increasingly  into 
action  as  a  support  to  automotive  transjiortation. 

Demand  by  Heavy-oil  Stationary  Engines. — The  heavy-oil  sta- 
tionary engines  of  the  Diesel  and  semi-Diesel  types  are  coming  into 
growing  importance  in  the  United  States.  No  data  are  available 
for  estimating  the  present  consumption  under  this  head,  but  in 
mines  and  for  oil  pipe-line  pumping  and  irrigation  work  in  th(^  Middle 
and  Far  West,  and  for  many  light  and  power  plants  of  small  size, 


160 


FUEL  OIL 


there  is  an  increasing  utilization  of  this  type  of  prime  mover.  It  is 
certain  that  the  heavy-oil  engine  already  playing  such  an  important 
part  in  power  production  in  the  older  countries  of  Europe  will  enjoy 
a  rapidly  expanding  use  in  the  United  States,  and  a  significant 
demand  for  suitable  types  of  fuel  oil  may  therefore  be  anticipated  on 
this  score. 

Demand  for  Gas  Manufacture. — A  considerable  quantity  of  fuel 
oil  is  consumed  annually  in  the  manufacture  of  gas.  In  the  Far 
West  where  coal  is  lacking,  residuum  fuel  oil  is  used  for  the  produc- 
tion of  oil  gas;  but  in  the  rest  of  the  country  distillate  fuel  oil  under 
the  name  of  gas  oil  is  employed  to  enrich  gas  made  from  coal  or  coke. 
(See  Table  71.)     The  demand  for  gas  oil  was  easily  met  so  long  as 

Table  7L — Estimated  Consumption  of  Gas  Oil  in  the  Manufacture  of 
Carbureted  Water  Gas  and  Mixed  Gas  in  the  United  States  During 
1920  BY  States  * 

Data  from  American  Gas  Association 

{hi  thnnsands  of  harrels) 


New  York 

Illinois 

Pennsylvania 

New  Jersey 

Massachusetts 

Michigan 

District  of  Columbia 

Connecticut 

Missouri 

Iowa 

Indiana 

Maryland 

Minnesota 

Texas 

Virginia 

Louisiana 

Rhode  Island 


6928 
218.'i 
1976 
1332 
1072 
555 

435 
388 
343 

285 
281 

278 

270 
233 
202 
184 
177 


Nebraska . . . 
Georgia .... 
Wisconsin .  . 
Washington . 
Delaware . . . 
Florida 


New  Hampshire. 

Alabama 

South  Carohna . . 

Colorado 

Ohio 

North  Carolina . . 


Tennessee.  .  .  . 

Maine 

South  Dakota. 

Vermont 

Others 


153 
1.52 
149 
122 
83 
76 

63 
59 
58 
36 
38 
36 

33 
31 
30 
22 
40 


Total 18,324 


*  Does  not  include  approximately  4450  thousand  barrels  of  fuel  oil  used  in  manufacture 

of  oil  gas  in  the  Pacific  States. 

there  was  a  surplus  seeking  an  outlet  in  this  direction.  With  the 
upgrowth  of  cracking,  however,  a  shortage  of  gas  oil  developed, 
and  the  gas  industry  is  deeply  concerned  with  the  ultimate  effect  of 
this  change.     The  price  of  gas  oil  is  now  determined  by  the  value  of 


DEMAND   FOR   INDUSTRIAL  PURPOSES  161 

motor-fuel,  and  the  gas  companies  can  obtain  their  accustomed  supply 
only  by  entering  into  competition  with  automotive  transportation. 
But  since  the  price  of  gas  is  limited  by  public  utility  regulations,  it 
seems  probable  that  the  gas  industry  will  find  increasing  difficulty 
in  paying  a  competitive  price,  and  in  consequence  will  be  forced 
either  to  change  their  practice  so  as  to  use  residuum  fuel  oil,  which 
will  tide  them  over  for  a  time,  or  else  gradually  give  up  the  employ- 
ment of  oil,  which  is  not  fundamentally  essential  w^ith  improved 
methods.^  In  fact,  when  properly  reorganized  along  modern  lines, 
the  gas  industry  will  not  only  be  able,  to  operate  without  contributions 
from  the  oil  industry,  but  will  actually  be  able  to  contribute  light  oils 
as  a  new  source  of  supply  to  oil  refineries.  The  conversion  of  coal 
into  gas  under  l)y-product  practice  not  only  has  this  possibility  for  the 
immediate  future,  but  changes  in  this  direction  are  Hkely  to  come 
with  some  measure  of  raj^idity. 

Demand  for  Industrial  Purposes. — Putting  to  one  side  the  fuel  oil 
employed  for  other  purposes,  there  was  left  in  1918  about  86  million 
barrels  for  the  use  of  industry.  Of  this  quantity  about  36  million 
barrels  was  consumed  west  of  the  Rocky  Mountains,  where  indus- 
trialism has  grown  up  dominant^  on  an  oil-fuel  basis.  This  left 
roughly  50  million  barrels  to  satisfy  the  industrial  demands  east  of 
the  Rockies.  While  these  figures  have  changed  somewhat  since  1918, 
they  go  to  show  that  the  industrial  field  is  meagerly  served  by  fuel 
oil,  in  spite  of  the  great  furor  that  of  recent  years  has  developed  in 
regard  to  the  industrial  shift  from  coal  to  oil.  It  is  evident  on  closely 
analyzing  the  resource  that  the  trend  in  this  direction  has  been  greatly 
exaggerated.  Of  the  fuel  oil  consumed  for  industrial  purposes  east 
of  the  Rockies,  a  considerable  proportion  is  used  in  the  metallurgical 
industries  where  oil  serves  a  distinct  and  unique  purpose.  Counting 
off  this  portion,  there  is  left  a  really  insignificant  quantity  as  com- 
pared with  the  hundreds  of  millions  of  tons  of  coal  consumed  in 
industry. 

Under  the  conditions  prevailing  over  the  past  few  j^ears,  efforts 
were  made  to  enlarge  the  eastern  demand  for  fuel  oil  in  railroad 
transportation  and  industry  in  competition  with  coal.  This  ten- 
dency was  greatly  accelerated  during  the  war,  and  many  came  to  see 
this  outlet  as  the  true  direction  in  which  fuel  oil  might  come  into  its 
own.  During  the  fall  and  winter  of  1919-1920,  in  pursuance  of  the 
example  of  1917-1918,  widespread  propaganda  was  put  into  effect 
in  favor  of  oil  as  a  sul)stitute  for  coal.  So  vigorously  was  this  idea 
pushed,  and  so  uncritical  were  many  in  respect  to  its  accomplishment, 
that  the  coal  associations  became  apprehensive  over  the  possibility 

1  See  Chapter  XXIII. 


162 


FUEL  OIL 


of  serious  inroads  being  made  upon  their  industry,  and  arguments 
were  even  advanced  to  the  striking  miners  at  the  time  that  the  coun- 
try was  no  longer  fundamentally  dependent  upon  their  efforts  in 
mining  coal.  The  pubhc  was  also  led  to  expect  that  a  new  element 
had  been  introduced  into  the  fuel  situation,  and  that  the  growing 
smokiness  of  cities  and  the  fuel  troubles  of  New  England,  and  so  on, 
could  be  remedied  by  the  newcomer,  oil.  The  unsoundness  of  the 
general  view  that  prevailed  in  the  latter  part  of  1919  may  be  seen 
from  Fig.  78,  which  shows  the  meagerness  of  the  country's  supply  of 

fuel  oil  as  compared  with 
coal.  To  replace  with 
fuel  oil  the  coal  consumed 
annually  in  the  United 
States  would  require  a 
production  of  crude 
petroleum  of  upwards 
of  3  billion  barrels,  a 
quantity  sufficient  to 
exhaust  the  entu'e  do- 
mestic petroleum  reserve 
in  two  years. 

Demand  for  Domestic 
Purposes.  —  In  connec- 
tion with  the  efforts 
directed  toward  the  sub- 
stitution of  oil  for  coal 
in  industry,  there  was 
considerable  planning  in 
Fig.  78. — The  relative  importance  of  coal  and  oil  favor  of  widespread  do- 
as  fuel  in  the  United  States,  1910-1920,  mestic     consumption    of 

fuel  oil,  especially  in 
New  York  and  New  England.  Such  a  project,  however,  may  be 
regarded  as  an  incidental  offshoot  of  the  general  agitation,  and 
there  is  no  prospect  of  significant  developments  of  this  kind,  in 
view  of  the  fact  that  the  domestic  demand  must  of  necessity  take 
what  is  left  after  commercial  requirements  are  satisfied. 

Summary  of  Demands. — It  would  seem  from  this  recital  that  the 
manifold  demands  for  fuel  oil  are  simultaneously  enlarging  at  the 
same  time  that  the  factors  influencing  the  supply  of  fuel  oil  are  losing 
force.  Among  the  multiplicity  of  demands  crowding  in  upon  the 
supply  of  fuel  oil,  a  great  variety  exists  as  regards  economic  strength, 
which  is  one  way  of  sa\'ing  that  certain  of  these  demands  can  afford 
to  pay  more  for  fuel  oil  than  can  others.     Where  such  is  the  case, 


191t     1912    1913     1914     1915    1916    1917     1318    1919     1920 


CONCLUSION  163 

and  shortage  develops,  lower  demands  must  go  by  default  in  favor  of 
higher  requirements.  On  this  basis,  residuum  fuel  oil  will  gradually 
disappear  from  the  market,  augmenting  the  supply  of  motor-fuel 
and  increasing  the  output  of  special  distillates  adapted  primarily 
to  the  needs  of  the  heay\'-oil  engine.  These  clianges  may  be  expected 
to  come  into  play  rather  quickly,  so  that  a  matter  of  a  few  years  may 
see  the  fuel-oil  situation  quite  radically  at  variance  with  that  obtain- 
ing in  1921. 

Conclusion. — Fuel  oil  offers  such  a  range  of  advantages  over  coal 
for  ocean  shipping,  and  such  high  economy  can  be  effected  through 
the  use  of  the  heayv'  oil  motor,  that  the  world's  shipping  is  rapidly 
turning  or  planning  to  turn  to  this  ideal  fuel.  In  view  of  the  Imiited 
nature  of  the  resource,  this  tendency,  once  under  full  swing,  may  be 
expected  to  bring  an  advance  in  price  such  as  will  largely  withdraw 
the  product  from  its  industrial  fuel  role,  especially  since  the  demand 
for  gasoline  at  the  same  time  will  be  pulling  more  and  more  heavily 
upon  fuel  oil  through  the  avenue  of  cracking.  As  soon  as  fuel  oil  is 
fairly  caught  between  the  pressure  of  this  twofold  motor  demand,  its 
availability  for  purely  industrial  purposes  on  land  in  competition 
with  coal  will  rapidly  become  a  thing  of  the  past.  Fuel  oil  to  the 
present  has  remained  cheap  only  because  of  its  production  in  advance 
of  the  growth  of  demands  adjusted  to  its  real  possibilities. 

It  is  questionable,  however,  if  the  world's  resources  in  petroleum 
can  support  for  more  than  a  transient  period  widespread  shipping 
operations  on  an  oil-fuel  basis.  Ultimately  automotive  transporta- 
tion on  land  may  be  expected  to  come  into  direct  competition  with 
marine  transportation  for  petroleum  supplies,  and  then  the  economic 
advantage  now  in  favor  of  petroleum  fuel  oil  for  ocean  shipping  will 
be  forced  back  to  the  side  of  coal  in  some  form. 


CHAPTER  XII 
LUBRICATING  OILS 

Introduction. — Of  the  various  products  derived  from  petroleum 
lubricants  represent  the  most  intricate  and  perplexing  to  describe. 
The  manufacture  and  application  of  lubricating  oils  is  an  art  rather 
than  a  science;  little  reliable  published  knowledge  exists  in  this  field, 
and  a  dearth  of  scientific  investigation  has  been  accorded  it. 
Even  among  practical  lubricating  men,  there  is  no  uniformity  of 
practice  or  methods,  and  diverse  opinions  are  available  on  almost 
every  point.  The  subject  is  complicated  further  by  variations  in  the 
character  of  the  crude  petroleums  from  which  lubricants  are  manu- 
factured, by  diversity  in  the  types  of  refining  employed  in  various 
parts  of  the  country,  and  by  an  obscure  and  illogical  nomenclature 
that  adds  to  the  confusion.  The  art  of  lubrication  is  still  largely  a 
matter  of  individual  knowledge  and  trade  secrets;  and  much  remains 
to  be  desired  in  the  way  of  accurate  information  on  the  subject. 

Relation  to  Crude  Petroleum. — The  lubricating  components  of 
crude  petroleum  are  a  graded  series  of  heavy  hydrocarbons  possessing 
sufficient  viscosity,  or  body,  together  with  certain  other  inadequately 
understood  properties,  to  fit  them  for  lubricating  service.  The 
quantity  and  character  of  the  lubricating  components  recoverable 
vary  with  the  type  of  crude  petroleum  employed.  The  paraffin- 
base  petroleums  upon  proper  treatment  yield  up  to  25  per  cent  of 
lubricating  oils;  the  asphalt-base  petroleums,  up  to  40  per  cent  or  so; 
while  the  mixed-base  crudes  run  from  perhaps  10  to  20  per  cent. 

In  regard  to  the  lubricating  components  of  crude  petroleum, 
Mabery  states  ■} 

"  The  next  series  of  hydrocarbons,  of  the  general  formula, 
C„H2„_2,  is  found  in  all  petroleum.  Collecting  in  the  fractions 
above  300°  C.  and  having  some  viscosity,  they  form  the  lubricants 
in  Appalachian  petroleum  that  are  prepared  for  sewing  machines, 
t\TDewriter  machines,  and  for  other  similar  light  lubrication.  The 
higher  members  of  this  series  are  also  constituents  of  the  heavy  motor- 
car lubricants.     Heavy  petrolemn,  in  general,  is  composed  to  a  large 

1  Composition  of  Petroleum  and  Its  Relation  to  Industrial  Use,  American 
Institute  of  Mining  and  Metallurgical  Engineers,  Publ.  No.  158,  Feb.,  1920,  p.  4. 

164 


RELATION   TO   REFINERY  PRACTICE  165 

extent  of  these  hydrocarbons;    but  although  in  such  general  use, 
their  structure  has  not  yet  been  ascertained. 

Next  in  order  is  the  series  C„H2„_4,  made  up  of  hydrocarbons 
possessing  a  high  viscosity;  C25H46  is  one  of  them.  These  hydro- 
carbons form  the  constituents  of  the  best  lubricants  it  is  possible  to 
prepare  from  petroleum.  Heavy  petroleum  with  an  asphaltic  base 
contains  these  hydrocarbons  in  large  proportion,  and  lighter  varieties 
in  smaller  amounts.  With  boiling  points  above  250°  C.  in  vacuum, 
the  decomposition,  when  distilled  with  dry  heat,  is  partly  prevented 
by  the  use  of  steam  in  the  still  or,  better,  by  excluding  air  and  reduc- 
ing the  boiling  points  by  exhaustion  when  these  hydrocarbons  may  be 
distilled  repeatedly  with  but  slight  decomposition.  Straight  petro- 
leum lubricants  are,  therefore,  made  up  mainly  of  a  few  viscous  hydro- 
carbons of  the  last  two  series  mentioned,  and  they  are  graded  by 
varjdng  the  mixtures  to  provide  for  the  kincl  of  lubrication 
desired." 

The  lubricating  components  of  paraffin  crudes  are  lighter  in 
weight  and  less  volatile  (vaporize  at  higher  temperatures)  than  the 
lubricating  components  of  asphaltic  crudes;  because  of  this  fact, 
coupled  with  differences  in  the  behavior  of  the  associated  paraffin 
wax  and  asphalt,  the  recovery  of  the  lubricating  content  differs  in 
the  two  types  of  crude.  Thus  the  lubricating  oils  in  paraffin-base 
crudes  are  only  partly  distilled  off,  the  larger  portion  being  recovered 
in  the  form  of  a  residue ;  whereas  with  asphaltic  crudes,  the  lubricating 
content  is  completely  distilled  off,  leaving  a  residue  of  asphalt. 
This  basic  difference  in  lubricating  yield  gives  rise  to  two  main  types 
of  lubricating  oils,  residual  lubricating  oils  (called  cylinder  stocks) 
and  distillate  lubricating  oils  (embracing  all  other  varieties), — a 
distinction  which  has  far-reaching  economic  consequences. 

The  bulk  of  lubricating  oils  in  this  country  is  still  m^ade  from 
paraffin-base  crudes,  although  there  is  a  marked  tendency  of  late  to 
bring  a  growing  quantity  of  mixed-base  and  asphalt-base  crudes  into 
luljricating  production,  especially  since  the  Eastern  paraffin  crudes 
are  running  short  of  requirements.  The  dominant  place  held  by  the 
paraffin  crudes  in  lubricating  manufacture  is  due  to  the  early  avail- 
ability of  the  Pennsylvania  |)araffin-base  crudes  and  to  their  peculiar 
adaptability  for  yielding  oils  of  sufficient  body  and  heat  resistance  for 
utilization  in  steam-cylinder  lubrication.  Thus  the  paraffin  crudes 
have  largely  determined  the  current  practice  in  the  refining  and 
application  of  lubricating  oils;  and  prevailing  opinions  on  matters  of 
lubrication  are  still  largely  colored  by  the  historical  precedence  of  the 
Pennsylvania  crudes. 

Relation  to  Refinery  Practice. — There  are  two  principal  methods 
of  refining  in  use  in  this  country — steam  distillation  and  dry,  or 
destructive,  distillation.     The  first  is  used  where  high-grade  lubri- 


166  LUBRICATING   OILS 

eating  oils  are  to  be  produced;  the  second  causes  some  decomposi- 
tion, or  cracking,  and  is  employed  where  a  maximum  yield  of  gasoline 
is  sought  without  reference  to  lubricating  output,  although  a  lessened 
and  inferior  yield  of  lubricating  oil  may  at  the  same  time  be  gained. 
A  full  extraction  of  lubricating  values  reduces  the  output  of  the  more 
volatile  distillates  such  as  gasoline  and  kerosene. 

As  the  demand  for  lubricating  oil  increases,  one  refinery  after 
another  changes  from  destructive  distillation  practice  in  which  the 
focus  is  upon  gasoline,  to  steam  distillation  practice  in  which  the  prime 
objective  is  lubricating  oil.  Thus  the  refineries  of  the  countrj^  may 
be  classified  into  (a)  skimming  plants,  in  which  the  volatile  distillates 
are  hastily  removed  from  the  main  body  of  the  crude,  which  is 
thereby  left  in  the  form  of  residual  fuel  oil;  (b)  plants  running  to 
coke,  wax,  or  asphalt,  in  which  the  practice  has  evolved  to  a  fuller 
extraction  of  components,  but  with  the  focus  still  upon  a  maximum 
yield  of  light  distillates,  destructive  distillation  still  dominant,  and 
the  yield  of  lubricating  oil  incidental  or  entirely  lacking;  and  (c) 
plants  running  to  lubricating  oils,  in  which  the  main  effort  is 
directed  toward  the  maximum  yield  and  quality  of  these  com- 
ponents. 

According  to  figures  compiled  by  the  U.  S.  Bureau  of  Mines  in 
Januar}',  1921,  skimming  plants  constitute  about  35  per  cent  of  the 
refinery  capacity  of  the  country;  plants  running  to  coke  or  asphalt, 
in  which  lubricating  manufacture  is  lacking  or  merely  incidental, 
about  19  per  cent;  and  plants  paying  considerable  attention  to 
the  production  of  lubricating  oils,  approximately  46  per  cent.  It  is 
thus  apparent  that  much  of  the  refinery  capacity  has  not  advanced 
to  lubricating  output,  as  is  indicated  also  by  a  recovery  factor  of 
only  5.4  per  cent  while  the  average  lubricating  content  of  the  crude 
supply  of  the  country  is  upwards  of  25  per  cent.  A  vast  volume  of 
potential  lubricants  is  burned  annually  in  the  form  of  fuel  oil. 

Basic  Types  of  Lubricating  Oils. — Fundamentally  there  are  two 
types  of  lu])ricants  from  which  the  numerous  grades  on  the  market 
are  manufactured ;  these  are  residual  lubricating  oil  (cylinder  stock) 
and  distillate  lubricating  oil.  Residual  lubricating  oil  is  made  from 
paraffin-base  and  mixed-base  crudes  by  steam  distillation  only. 
Distillate  lubricating  oil  embraces  three  main  varieties:  (a)  non- 
viscous  neutrals,  made  from  all  three  types  of  crude  by  steam  dis- 
tillation; (6)  viscous  neutrals,  of  heavier  body  than  the  non- viscous 
neutrals,  made  from  all  three  types  of  crude  by  steam  distillation; 
and  (c)  paraffin  oils,  made  from  paraffin-base  and  mixed  base  crudes 
by  destructive  distillation.  The  relations  of  these  major  types  of 
basic  lubricants  are  shown  in  the  following  table: 


RESIDUAL   LUBRICATING   OIL 


167 


Table  72. — Principal  Types  of  Lubricating  Oils 


Types  of  Crude 

Steam  Distillation 

Destructive 

DlSTILLATION 

Distillate                                 Residual 

Distillatc 

Paraflfin-base 

Non-viscous  neutrals  Cylinder  stocks 
Viscous  neutrals 

Paraffin  oils 

Mixed-base 

Non-viscous  neutrals 
Viscous  neutrals 

Cylinder  stocks           Paraffin  oils 

Asphalt-base 

Non- viscous  neutrals 

Viscous  neutrals 

Residual  Lubricating  Oil  (Cylinder  Stock). — Cylinder  stock  is 
the  residue  left  after  gasoline,  kerosene,  gas  oil,  and  lubricating  dis- 
tillates have  been  distilled  off  from  paraffin-base  or  mixed-base 
crudes.  Practically  all  of  the  Eastern  paraffin  crudes  are  made  to 
yield  a  maximum  output  of  cylinder  stock,  but  only  a  small  portion  of 
the  Mid-Continent  paraffin  and  mixed-base  crudes  are  yet  refined 
for  this  product.  Asphaltic  crudes  do  not  produce  c^dinder  stock, 
since  their  entire  lubricating  content  may  be  distilled  off,  leaving 
a  residue  of  asphalt  instead  of  cyhnder  stock. 

Cylinder  stock  is  relatively  highly  resistant  to  heat,  and  [r.  con- 
sequence is  used  for  the  lubrication  of  steam  cylinders,  a  service 
which  distillate  lubricating  oils  are  unable  to  render  satisfactorily 
because  of  their  lower  heat  resistance.  Cylinder  stock  is  also  highly 
viscous,  or  heavy-bodied,  as  compared  with  the  neutrals  made 
from  paraffin-base  and  mixed-base  crudes  (although  distillate  lubri- 
cants of  comparable  body  may  be  made  from  asphaltic  crudes), 
and  hence  is  widely  in  demand  as  a  blending  agent  for  giving  the 
requisite  body  to  oils  designed  for  the  lubrication  of  heavy  service 
engines,  machines,  and  motors.  Much  of  the  cylinder  stock  produced 
is  filtered  to  gain  a  bright,  attractive  color,  a  property  which  the 
consumer  has  been  taught  to  fancy  and  deem  essential. 

Non-viscous  Neutrals. — These  oils  are  the  light-bodied,  low-vis- 
cosity distillates  produced  from  paraffin-base  and  mixed-base  crudes 
in  connection  with  the  manufacture  of  cylinder  stocks,  and  from 
asphaltic  crudes  that  are  run  to  lubricating  oils.  They  are  used  for 
the  lubrication  of  light  machinery,  especially  the  spindles  of  textile 
mills;  but,  lacking  sufficient  body,  they  must  l)e  blended  with  more 
viscous  oils  for  the  general  run  of  lubricating  service.     Produced  in 


168  LUBRICATING  OILS 

greater  quantities  than  required  by  light  machinery,  they  are  not  in 
strong  demand  and  theh  price  is  relatively  low. 

Viscous  Neutrals. — These  oils  are  distillates  of  heavier  body  than 
the  non- viscous  neutrals;  they  are  produced  from  parafiin-base  and 
mixed-base  crudes  which  are  run  to  cylinder  stock,  and  from  asphaltic 
crudes  which  are  subjected  to  proper  refining.  The  viscous  neutrals 
of  asphaltic  origin  include  oils  of  higher  viscosity  than  those  made 
from  the  paraffin  crudes,  being  partly  comparable  in  body  to  cjdinder 
stock.  The  viscous  neutrals  of  paraffin  origin  lack  sufficient  body 
for  heavy-service  lubrication,  and  hence  for  many  purposes  are 
blended  with  cylinder  stock.  The  heavier-bodied  neutrals  of 
asphaltic  origin  have  sufficient  viscosity  to  support  their  utilization 
in  unblended  form  for  heay>'-service  lubrication. 

Paraffin  Oils. — The  so-called  paraffin  oils  are  lubricants  incident- 
ally recovered  in  processes  primarily  concerned  with  the  maximum 
output  of  gasoline  and  kerosene.  Thej^  are  not  quite  equal  in  qual- 
ity to  the  neutrals  and  stocks,  since  they  are  refined  by  destructive 
distillation  which  impairs  the  yield  and  quality  of  the  lubricants 
recovered.  The  paraffin  oils  have  been  improved  in  many  instances 
by  better  methods  of  manufacture,  and  although  they  may  ulti- 
mately play  a  waning  role,  a  large  volume  of  such  oils  will 
undoubtedly  continue  to  come  on  the  market  for  a  considerable 
period. 

Blended  Lubricants. — The  four  major  types  of  lubricating  oils — 
non-viscous  neutrals,  viscous  neutrals,  cylinder  stocks,  and  paraffin 
oils — may  be  used  singly  or  appropriate^  blended.  For  light 
machinerv",  such  as  the  spindles  of  textile  mills,  the  non-viscous 
neutrals  are  usually  emploj^ed,  while  the  lubrication  of  steam  cyl- 
inders demands  a  cylinder  stock;  but  for  the  majority  of  appli- 
cations a  neutral  or  paraffin  oil  is  mixed  with  a  cylinder  stock,  the 
function  of  the  latter  being  to  give  the  mixture  sufficient  body,  or 
viscosity.  For  the  better  class  of  lubricating  service,  such  as  high- 
grade  machineiy  and  internal  combustion  engines,  the  paraffin  oils 
are  not  regarded  as  adequate;  hence  much  of  the  lubricating  demand, 
including  most  of  the  high-grade  (most  profitable)  portion,  draws 
its  requirements  from  the  neutrals  and  cylinder  stocks.  The  growth 
of  industrial  activity,  during  the  past  years  in  particular,  has  not 
only  increased  the  demand  for  lubricating  oils  of  all  kinds,  but  the 
development  of  better  grades  of  machinery  and  new  types  of  engines 
has  thrown  a  relatively  greater  demand  upon  the  neutrals  and 
cylinder  stocks,  to  the  growing  exclusion  of  the  paraffin  oils  and 
inferior  tjTDes;  at  the  same  time  that  the  trend  of  lubricating  require- 
ments has  been  in  the  direction  of  more  viscous  oils,  to  the  projection 


DEVELOPMENTS  OF   LUBRICANTS  169 

of  a  growing  burden  upon  cylinder  stocks,  upon  which  the  attain- 
ment of  any  considerable  degree  of  viscosity  has  heretofore  been 
dependent.  In  short,  the  demands  for  the  various  types  of  lubri- 
cating oils  have  been  growing  at  different  rates,  with  a  strong  swing 
toward  oils  of  greater  viscositj",  and  this  tendency  has  been  met  by 
increasing  use  of  blended  oils,  particularly  mixtures  of  neutrals  and 
cylinder  stocks.  In  this  wise,  c^'linder  stocks,  which  are  preferred 
for  steam-cyhnder  lubrication  because  of  their  resistance  to  high 
temperatures,  have  come  generally  to  be  regarded  as  essential  to 
the  manufacture  of  high-grade  lubricants  of  all  other  types  requir- 
ing considerable  body. 

Development  of  Lubricants  from  Asphaltic-base  Petroleums. — 
While  the  changes  in  demand  noted  above  were  taking  place,  the 
growing  production  of  asphaltic  crudes,  in  the  face  of  a  slowing  output 
of  paraffin  crudes  upon  which  lubricant  manufacture  had  been  depend- 
ent, was  stimulating  the  upgrowth  of  processes  and  refineries  capable 
of  making  neutral  oils  from  crudes  which  earlier  were  deemed  fit  only 
for  yielding  fuel  oil.  There  is  now  an  appreciable  and  increasing  out- 
put of  neutral  oils  of  asphaltic-crude  origin,  and  the  neutrals  so  made 
cover  a  range  of  viscosities  corresponding  not  only  to  the  viscosities 
of  the  neutral  oils  made  from  paraffin-base  crudes,  but  partly  to 
those  of  cylinder  stocks  as  well.  In  fine,  so  far  as  viscosities  are 
concerned,  the  asphaltic  crudes  yield  distillate  lubricating  oils  of 
nearlj'  as  wide  a  scope  as  the  combined  distillate  and  residual  lubri- 
cants obtained  from  the  paraffin-base  and  mixed-base  crudes. 

Since  lubricating  practice  was  established  and  developed  on  the 
basis  of  paraffin  crudes,  the  introduction  of  lubricating  oil  of  asphaltic- 
crude  origin  has  naturally  been  handicapped  by  an  immature  tech- 
nology and  a  prejudiced  market.  The  majority  of  practical  oil  men, 
brought  up  in  the  paraffin  school,  are  reluctant  to  see  any  virtue  in 
the  newcomer,  while  oil  men  interested  in  the  development  of  lubri- 
cants from  asphaltic  crudes  are  naturally  strong  advocates  of  their 
products.  In  consequence  not  only  is  there  no  unanimity  of  opinion 
on  this  point  in  the  oil  business,  but  two  distinct  and  opposing  points 
of  view  prevail — a  situation  that  may  be  found  even  within  a  single 
company.  The  published  and  privately  expressed  opinions  of  the 
leading  petroleum  chemists  and  technologists  in  the  country,  how- 
ever, are  practically  unanimous  in  asserting  that  for  all  purposes  other 
than  steam-cylinder  lubrication  the  lubricating  oils  made  from 
asphaltic  crudes  are  inherently  as  serviceable  as  those  made  from 
paraffin  crudes. 

The  Supply  of  Lubricating  Oils. — The  production  of  lubricating 
oils  in  the  United  States  by  refinery  districts  for  the  years  1918,  1919, 


170 


LUBRICATING   OILS 


and  1920  is  shown  in  the  following  table,  while  the  data  for  1920  are 
presented  *i;raphically  in  Fig.  79: 

Table  73. — PuoDrrTio.v  and  Pehcentacje  Yields  of  Lubricating  Oils  in  the 
United  States,  1918-1920 


Refinnry  DLstrict 

1918 

1919                                   1920 

i 

Produc- 
tion, 
Millions 

of 
Gallons 

Per  Cent 
of  Total 

Oil 

Run  to 

Stills 

Produc- 
tion, 
Millions 

of 
Gallons 

Per  Cent 

of  Total 

Oil 

Run  to 
Stills 

Produc- 
tion, 
Millions 

of 
Gallons 

Per  Cent 
of  Total 

Oil 

Run  to 

Stills 

East  Coast 

Pennsylvania,  etc. . . 
Illinois,  Indiana,  etc. 
Kan.,  Okla.,  etc.  .  .  . 
Texas,  Louisiana .  .  . 
Wyoming,  Colorado. 
California 

Total 

257 

183 

97.5 
110 
123 
3.65 

66.9 

8.6 
21.0 
7.7 
3.7 
3.4 
0.53 
2.0 

280' 
181 

102 

93.2 
121 
3.48 

65.6 

8.2 

19.0 
6.2 
3.3 
3.0 
0.41 
1.9 

329 

190 

126 
91.2 

203 
14.6 
92.1 

8.5 
19.3 
6.3 
3.0 
3.9 
1.46 
2.7 

841 

5.33 

847 

4.92 

1047 

5.37 

MILLIONS   OF   GALLONS 

lOO  200  300        400 


EAST  COAST 


PENN.    ETC. 


ILL.-  IND.   ETC. 


KAN.- OKLA.  ETC 


tex.^la. 


WYQ.  COLO.  ETCM  14.6 


PERCENTAGE   OF  TOTAL   CH.8 
RUN   TO  STILLS 

15  2p 


Fig.  79. — Output  and  percentage  yields  of  lubricating  oils  in  the  ITnited  States 
Vjv  refinery  districts  in  1920. 

It  may  be  seen  from  these  exhibits  that  while  the  bulk  of  the 
lubricating  oil  is  manufactured  in  the  East,  a  notable  and  growing 
quantity  is  made  in  the  Middle  and  Far  West.  The  per(!entage 
yields  are  also  seen  to  vary  between  wide  limits — from  19.3  per  cent 


TREND  OF  THE  CURRENT   SITUATION 


171 


in  the  Pennsylvania  district,  where  lubricants  have  been  longest 
manufactured,  to  1.46  per  cent  in  Wyoming,  of  recent  note  as  an  oil 
producer.     These  variations  are  another  reflection  of  the  great  volume 


Fig.  80. — Trend  of  the  lubricating  oil  situation  in  the  United  States  by  months, 

1917-1921. 


of  crude  petroleum  used  from  which  the  lubricating  content  is  not 
extracted. 

Trend  of  the  Current  Situation. — The  trend  of  the  major  factors 
entering  into  the  current  interplay  between  the  supply  and  demand 


172  LUBRICATING  OILS 

Table  74. — Summary  of  the  Lubricating  Oil  Situation 


Period 


Produc- 
tion, 
Millions 

of 
Gallons 


Stocks,* 
Millions 

of 
Gallons 


Exports, 
MUlions 

of 
Gallons 


Domestic 
Consump- 
tion, 
Millions 

of 
Gallons 


Average 
Domestic 
Price  I  job- 
bing), 
I  Cents  per 
Gallon 


Average 
Export 
Price, 
Cents 

per 
Gallon 


By  years:  1914. 
1915. 
1916. 
1917. 

1918. 
1919. 
1920. 


517 

624 
754 

841 

847 

1047 


137 

139 
137 
161 


192 
240 
261 
280 

257 

275 
411 


582 
574 
612 


15.6 
14.9 
18.3 
19.5 

30.9 
32.2 
48.9 


13.7 
13.5 
16.5 
20.6 

29.4 
30.9 
38.0 


By  months: 

1919.  January. 
February 
March.  . 


April. 
May . 
June. 


July .  .  . 
August . 
September 

October.  . 

November 
December 


68 
63 
67 

71 

76 
65 

67 
73 
70 

79 
76 

72 


158 
152 
165 

170 
174 
175 

174 
171 
159 

153 
149 
137 


22 
27 
21 

30 
19 
25 

16 
21 
22 

24 
26 

28 


27 
42 
33 

37 
53 
39 

52 
57 
60 

61 
54 
56 


33.3 
33.2 
32.5 

32.4 
31.8 
31.9 

31.9 
31.7 
31.6 

31.6 
31.6 
32.7 


36.5 
34.6 

28.9 

26.4 
33.0 
30.7 

34.1 
29.8 
29.1 

28.9 
28.9 
30.9 


By  months: 
1920.  ' 


hs: 

January. .  . 
February. . 
March .... 

76 
74 
82 

142 
133 
131 

24 
33 
44 

47 
50 
40 

39.5 
45.4 
50.8 

April 

May 

Jime 

86 
89 
95 

140 
136 
133 

39 

42 
27 

37 
52 
66 

51.4 
51.7 
55.7 

July 

August .... 
September . 

92 
91 
86 

132 
131 
130 

28 
34 
29 

65 

58 
57 

52.1 
51.4 
50.0 

October .  .  . 
November . 
December . 

93 
91 
91 

136 
142 
161 

33 
34 
51 

55 
51 
21 

48.6 
46.0 
44.9 

32.1 
33.8 
36.4 

33.6 
33.9 
38.5 

38.5 
37.8 
41.4 

40.9 
46.0 
39.5 


By  months: 

1921.  January. . 
February . 
]\Iarch .  .  . 

April 

May 

June 


86 

184 

38 

25 

38.6 

72 

202 

30 

24 

33.6 

73 

223 

15 

37 

31.1 

76 

250 

23 

26 

29.9  1 

70 

262 

17 

51 

23.8  ' 

63 

261 

15 

49 

23.8  1 

44 
40 
43 

35 
34 


29.8 


*  End  of  period. 


RELATION   OF   PRODUCTION   TO   STOCKS 


173 


of  lubricating  oils  is  shown  in  Fig.  80.  The  outstanding  features  of 
this  chart  are:  The  marked  rise  in  production  and  exports  in  1920; 
the  sharp  advance  in  price  during  the  first  half  of  1920,  followed 
by  a  steady  fall  the  second  half;  and  the  declining  stocks  over 
much  of  1919  and  1920.  The  supporting  data  for  Fig.  80  are  given  in 
Table  74. 

Relation  of  Production  to  Stocks. — The  volume  of  lubricating  oils 
produced  monthly  in  the  various  refinery  districts  of  the  country 
during  1919  and  1920,  compared  with  the  stocks  on  hand,  is  shown 
graphically  in  Fig.  81.  The  advance  in  output  of  Texas-Louisiana  in 
1920  over  1919  attests  the  growing  attention  latterly  devoted  to 
lubricating  manufacture  on  the  Gulf  Coast.  The  size  of  the  stocks 
in  the  East  is  worthy  of  especial  note,  as  well  as  the  general  tendency 
for  the  stocks  in  all  sections  of  the  country'  to  increase  in  the  closing 
months  of  1920.     The  data  entering  into  Fig.  81  are  given  in  Table  75. 

No  recent  figures  are  available  for  the  country  at  large  showing 
the  output  of  the  various  types  of  lubricating  oils,  nor  the  relative 
degree  to  which  the  stocks  of  these  types  have  accumulated.  Infor- 
mation of  this  kind  would  be  of  the  highest  value  in  indicating  the 
future  course  of  the  lubricating  market.  Partial  information  of  this 
character  is  available,  however,  in  the  U.  S.  Census  of  Manufactures 
and  is  presented  in  the  table  following ; 


Table  76.- — Production  of    Lubricating  Oils  in  1914  and  1919  by  Types 
Data  from  U.  S.  Census  of  Manufactures 


Type 

Production 

Value 

Millions  o: 

Gallons 

Per  Cent 

of  Total 

Cents  per  Gallon 

1914 

1919 

1914 

1919 

1914 

1919 

Pale  or  paraffin .... 

Red  or  neutral 

Cylinder  oils 

Others 

Total 

93 
116 
103 
205 

123 
211 
235 
250 

18 
22 
20 
40 

15 
26 
29 
30 

8.7 
10.7 
13.3 
10.7 

22.9 
21.2 
25.1 

25.8 

517 

8l9 

100 

100 

10.8 

24.0 

The  Demand  for  Lubricating  Oils. — The  demand  for  lubricating 
oils  during  the  past  five  years  has  not  onh'  been  increasing  in  quan- 
tity, but  shifting  in  character.  The  growth  of  demand  is  indicated 
approximately  by  the  country's  output  of  lubricants,   since  pro- 


174 


LUBRICATING   OILS 


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THE   DEMAND   FOR   LUBRICATING   OILS 


175 


duction  in  a  general  way  adjusts  itself  to  demand.  The  shift  in  the 
character  of  demand,  however,  is  of  even  greater  significance  and  a 
view  of  this  factor  is  presented  in  Fig.  82.  With  the  data  available 
it  has  been  possible  to  divide  the  demand  only  into  its  principal  com- 

PRODUCTION  STOCKS  ON  HAND     ""^op"' 


MILLIONS 

OF 
GALLONS 

30 

20  H 

10 


20  r 

loi 


'S 


'^D 


PT 


919 


1920 


EAST   COAST 


PENN.    ETC. 


ILL.  -  IND.    ETC. 


KAN.  -  OKLA.   ETC. 


WYO.     COLO.    ETC 


1919 


60 
50 
40 
30 

-j20 
_  10 


n40 
30 

20 

H  10 
o 


1920 


i'S 


Fic.  SI. — Production  and  stocks  of  lubiiciiting  oils  in  the  various  refinery  districts 
of  the  United  States  by  months,  1919-1920. 

ponents — exports,  railway  consumption,  industrial  consumption,  and 
automotive  consumption.  Such  a  division,  however,  is  sufficient  to 
show  that  automotive  demand  has  cut  sharply  across  the  field,  giving 
a  new  aspect  to  the  situation.  Close  study  of  Figs.  82-85  will  indicate 
more  strikingly  than  words  the  relative  importance  of  the  various 


176 


LUBRICATING   OILS 


demands  and  the  highly  significant  position  attained  In-  the;  require- 
ments of  automotive  transportation. 


IIOO 

' 

800 
600 

r^:*'i2- 

0^ 

U.  S.         PRODUCTION        OF 

uJgS 

400 
300 

-  lUrtw 

^ 

— ~ 

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EXPORTS 

coNSur 

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0 

i-  10 

20 

{-  30 

40 

■I-  50 5t 


1911      1912      1913      1914      1915      1316      1917       1913     1919      1920      1921 


Fig.  82. — Trend  of  supply  and  demand  f<jr  lubricating  oils  in  the  United  States, 

1910-1920. 


Exports  of  Lubricating  Oils. — The  growth  in  exports  of  lubri- 
cants during  the  past  ten  years  is  shown  in  Fig.  82,  while  Fig.  85  indi- 


EXPORTS   OF   LUBRICATING   OILS 


177 


Fi( 


1911  1912  1913  1914  1915  1916  1917  1913  1919  1920 


S3. — Percentage  analysis  of  the  demand  for 
lubricating  oils,  1910-1920. 


cates  the  size  of  exports  as  compared  with  the  domestic  consumption. 
Roughly,  a  third  of  our  lubricating  oil  is  sent  abroad.  A  large  pro- 
portion of  the  world's  ioo;«p 
machinery  is  lubricated 
by  American  oil,  411 
million  gallons  of  lubri- 
cating oil  being  exported 
in  1920  for  this  purpose. 
As  to  the  grades  of  oil 
sent  abroad,  a  large  pro- 
portion is  cylinder  stock, 
because  the  foreign  prac- 
tice, especially  on  the 
Continent,  makes  use  of 
high-pressure,  superheat- 
ed steam  demanding  a 
high-grade,  high-test 
cylinder  stock.  It  has 
been  stated  that  prob- 
ably as  much  as  80  per  cent  of  our  cylinder  stocks  are  exported. 
Whether  or  not  this  figure  is  correct,  it  is  evident  that  a  large  share  of 
our  heavy-bodied  lubricating  oil  and  the  cream  of  the  American 

output  goes  into  foreign 
trade.  The  bearing  of 
this  fact  upon  the  do- 
mestic situation,  and 
especially  upon  the 
course  of  lubricating 
prices  is  very  significant. 
It  is  evident  that  the 
industrial  rehabilitation 
of  Europe  is  dependent 
upon  a  steady  flow  of 
lubricants  from  this 
country,  since  cylinder 
stocks  are  not  manu- 
factured from  foreign 
crudes  in  significant 
quantities,  nor  can  new- 
ly developed  petroleum 
resources  abroad  come  rapidl}'  into  lul)rlcating  production. 

The  Railroad  Demand  for  Lubricants. — The  lubrication  require- 
ments of  American  railroads  have  been  largely  met  by  the  products  of 


1911  1912  1913  1914  1915  1916  1917  1913  1919  1920 


Fig.  84. — Percentage  analysis  of  the  automotive 
consumption  of  lubricating  oils  in  the  United 
States,  1910-1920. 


178 


LUBRICATING   OILS 


one  company,  and  this  condition  still  prevails  though  not  to  such 
an  exclusive  degree  as  was  the  case  ten  to  fifteen  years  ago.  The 
consumption  of  lubricating  oils  by  American  railways  may  be  roughly 
estimated  from  data  published  by  the  Bureau  of  Corporations  in 
1906,  and  brought  reasonably  up  to  date  on  the  basis  of  car  mileage 
statistics  issued  by  the  Bureau  of  Railway  Economics.  While  not 
exact,  the  results  of  this  calculation  arc  given  in  the  following  table: 


Table  77. — Estimated  Consumption  of  Lubricating  Oil  by  the   Rolling 
Stock  of  the  United  States  Railways 

(Millions  of  (jallmis) 


Year 

Valve  Oil 

Engine,  Coach 
and  Car  Oil 

Total 

1910 

4.8 

26.0 

30.8 

1911 

5.0 

26.2 

31.2 

1912 

5.0 

26.2 

31.2 

1913 

5.5 

28.7 

34.2 

1914 

5.3 

28.1 

33.4 

1915 

5.2 

27.1 

32.3 

1916 

5.9 

30.6 

36.5 

1917 

5.8 

30.6 

36.4 

It  is  apparent  from  this  table  and  from  Figs.  82,  83,  and  85  that  the 
railway  consumption  has  not  been  increasing  significantly  and  does 
not  represent  a  highly  important  item  in  point  of  size  as  compared 
with  motor  oil  or  industrial  lubricant  consumption.  It  may  be 
noted  further  that  the  bulk  of  the  railway  consumption  is  for  the 
lubrication  of  bearings  which  does  not  rocjuirc  a  high-grade  oil. 

The  Industrial  Demand  for  Lubricating  Oils. — The  quantity  of 
lubricating  oils  consumed  in  the  United  States  for  industrial  purposes 
has  been  approximately  determined  by  subtracting  from  the  total 
production  each  year  the  quantity  exported  and  consumed  at  home  by 
railways  and  automotive  transportation.  Reference  to  Figs.  82  and 
85  will  indicate  that  the  industrial  consumption,  while  increasing 
notably  in  1917  and  1918,  has  fallen  off  slightly  in  1919  and  1920. 
The  industrial  demand,  however,  is  intimately  connected  with  the 
industrial  growth  of  the  country  and  will  increase  in  keeping  with  it, 
although  the  relative  importance  of  the  industrial  demand  compared 
with  the  requirements  of  automotive  transportation  may  be  expected 
for  a  time  to  decline,  as  indicated  in  Fig.  83. 

The  character  of  the  industrial  demand  is  changing  somewhat, 


THE  AUTOMOTIVE  DEMAND  FOR  LUBRICATING  OILS     179 

due  to  the  development  of  finer  types  of  machines,  the  speedy 
growth  of  the  electrical  industry,  the  rapid  development  of  steam 
turbine  practice  which  is  steadily  replacing  the  reciprocating  steam- 
engine  in  large  installations,  and  the  rapid  upgrowth  of  the  internal 
combustion  engine  in  the  stationary  field.  These  changes,  which  for 
the  present  cannot  be  accurately  measured,  are,  nevertheless,  strik- 
ingly in  a  consistent  direction,  throwing  a  growing  burden  on  the  more 


GALLONS 

1100 


1000 
900 
800 

700 
600 
500 
400 


100 


V//:,  STOCKS  OF 

/:'>::  LUBR.    OILS" 

'{////■^  IN    U.S.    ON 

/  JAN.  1,  1921 

i 


30o:  V'--.: 


200 


1911      1912     1913     1914     1915     1916     1917     1918      iai9     1920     1921 


Fin.  85. — Analysis  of  the  fj;n)wth  in  tho  demand  for  lul)rifatinp;  oils  in  the  ITnited 

States,  lyiU-1920. 


highty  refined  types  of  lubricating  oils  and  upon  the  lubricants  of 
heavier  body.  This  unmistakable  trend  is  reflected  in  a  growing 
market  for  viscous  neutrals  and  cylinder  stocks,  in  contrast  to  non- 
viscous  neutrals  and  especially  the  paraffin  oils  and  other  types  made 
incidental  to  the  manufacture  of  gasoline  and  kerosene. 

The  Automotive  Demand  for  Lubricating  Oils. — The  phenomenal 
growth  of  automotive*  transportation  is  familiar  to  all,  and  the 
requirements  of  this  field  have  occasioned  a  rapidly  mounting  pro- 


180 


LUBRICATING  OILS 


duction  of  motor-oil.  The  significance  of  the  motor-oil  demand  may 
be  gathered  from  Figs.  82  and  85  where  its  striking  rate  of  increase  is 
graphically  shown.  The  growth  in  motor-oil  consumption  has  been 
calculated  by  multiplying  the  average  number  of  cars,  trucks  and 
tractors  in  use  by  an  appropriate  consumption  factor.  The  data  are 
given  in  the  following  table : 

Table  78. — Automotive  Demand  for  Lubricating  Oils 
{000  omitted) 


Average 

Gallons  of 

Average 

Gallons  of 

Average 

Gallons  of 

Total 

Number 

Motor  Oil 

Number 

Motor  Oil 

Number 

Motor  Oil 

Gallons  of 

Year 

Passenger 

Consumed 

Trucks 

Consumed 

Tractors 

Consumed 

Motor  Oil 

Cars 

Factor: 

in 

Factor: 

in 

Factor : 

Consump- 

in Use 

25  Gallons 

Use 

75  Gallons 

Use 

75  Gallons 

tion 

1910 

460 

11,500 

15 

1,125 

6 

450 

13,075 

1911 

610 

15,250 

27 

2,062 

10 

750 

18,062 

1912 

780 

19,500 

42 

3,150 

15 

1,125 

23,775 

1913 

1060 

26,. 500 

65 

4,875 

16 

1,200 

32,.575 

1914 

1350 

33,7.50 

108 

8,100 

17 

1,275 

4.3,125  ' 

1915 

1870 

46,7.50 

167 

12,525 

20 

1,500 

60,775 

1916 

2700 

67,500 

250 

18,7.50 

30 

2,250 

88,500 

1917 

3800 

95,000 

360 

27,000 

50 

3,750 

125,750 

1918 

5000 

125,000 

550 

41,250 

90 

6,750 

173,000 

1919 

6000 

1.50,000 

820 

61,.500 

162 

12,150 

223,650 

1920 

7236 

178,000 

990 

74,300 

300 

22,. 500 

274,800 

The  accelerating  demand  for  automotive  purposes,  which  now 
represents  about  a  quarter  of  the  country's  total  output  of  lubri- 
cants and  approximates  the  entire  domestic  industrial  demand,  is 
having  a  marked  selective  influence  upon  the  lubricating  market. 
Automotive  lubrication  requires  principally  four  grades  of  lubricating 
oil — light,  medium,  heavy,  and  extra  heavy — with  a  growing  swing 
to  the  heavier  grades  brought  about  by  the  rapid  increase  of  trucks 
and  tractors,  together  with  a  growing  appreciation  of  the  fact  that 
the  general  practice  in  the  past  has  been  in  the  direction  of  oils  of 
inferior  body.  To  meet  the  requirements  of  automotive  transporta- 
tion from  lubricating  oils  manufactured  from  parafiin-base  and  mixed- 
base  crudes,  it  has  been  thought  necessary  to  blend  cj'hnder  stocks 
with  viscous  or  non-viscous  neutrals  to  gain  the  requisite  body. 
This  procedure  placed  an  unexpected  and  unprecedented  demand 
upon  the  heavy-bodied  oils,  nameh',  the  cylinder  stocks  and  especially 
the  filtered  varieties,  with  the  result  that  a  shortage  of  such  products 
accompanied  by  a  marked  advance  in  their  price  developed  early  in 
1920. 


SEASONAL    CHARACTER    OF    AUTOMOTIVE    DEMAND     181 

The  growing  stress  falling  upon  the  heavier-bodied  motor-oils 
by  virtue  of  the  natural  trend  of  automotive  growth  has  been  accom- 
panied by  a  change  in  character  of  the  fuel  consumed.  The  decreas- 
ing volatility  of  gasoline  caused  by  the  incorporation  of  a  growing 
proportion  of  heavy  ends  into  the  marketed  product  has  given  rise  to 
a  condition  in  which  the  lubricating  oil  in  service  is  subjected  to 
dilution,  or  thinning.  This  condition  has  contributed  to  the  neces- 
sity for  heavier-bodied  oils,  and  the  future  would  seem  to  indicate 
that  the  growing  demand  for  motor-fuel  will  lead  to  further  dilution 
and  therefore  swing  the  general  practice  in  even  greater  degree 
toward  heavier-bodied  motor-oils. 


Table  79. — Estimated  1921  Domestic  Demand  for  Motor  Oil  by  Months 


Month 


January .... 
February . . . 
March 

April 

May 

June 

July 

August 

September. . 

October .  .  .  . 
November. . 
December.  . 

Total 


Per  Cent  of 
Year's  Total 

Required 
Each  Month 


5.4 
5.8 
6.4 

7.2 
8.5 
9.9 

11.2 
11.8 
10.4 


7.9 

6.7 


Millions  of 

Gallons  Required 

Each  Month 


15.5 
16.6 
18.3 

20.6 
24.4 

28.4 

32.2 
33.8 
29.8 

25.2 

22  7 
19.2 


Per  Cent  of 
Year's  Total 

Required 
Each  Quarter 


17.6 


25.6 


33.4 


23.4 


100 


286.7 


100 


Seasonal  Character  of  Automotive  Demand. — The  consumption 
of  motor-oil  displays  a  seasonal  variation  corresponding  to  the 
increased  employment  of  motor  vehicles  in  the  warm  months.  The 
course  of  the  motor-oil  demand  throughout  the  twelve  months  of 
the  year  follows  closely  the  variations  in  gasoline  requirements,  and 
may  be  worked  out  on  the  same  basis  as  that  given  on  page  128. 
The  seasonal  curve  will  vary  slighth^  from  year  to  year  according  to 
the  rate  at  which  the  demand  is  increasing.  The  estimated  1921 
demand  for  motor-oil,  distributed  over  the  twelve  months  of  the 
year,  is  shown  in  Table  79. 


182  LUBRICATING   OILS 

The  estimate  of  the  total  demand  is  arrived  at  as  follows : 

Millions  of 
gallons 

8.5  million  cars  at  25  gallons  discounted  10  per  cent 191 

1.1  million  trucks  at  75  gallons  discounted  10  per  cent 73 

0.3  million  tractors  at  75  gallons 23 

287 

The  numbers  of  cars  and  trucks  are  determined  by  averaging  the 
registration  figures  for  January  1,  1920,  and  January  1,  1921,  in 
order  to  get  the  average  number  of  units  employed  during  the  year. 
The  normal  gallonage  is  discounted  10  per  cent  to  allow  for  a  de- 
creased utilization  probable  as  a  result  of  the  industrial  depression. 
The  final  results,  of  course,  are  only  approximate,  but  are  perhaps 
of  sufficient  accuracy  to  serve  a  useful  purpose. 


CHAPTER  XIII 
PETROLEUM  BY-PRODUCTS 

The  petroleum  industry  turns  out  four  products  of  major  impor- 
tance— gasoline,  kerosene,  fuel  oil,  and  lubricating  oil,  with  many- 
varieties  falling  under  each  head — and  a  number  of  additional  sub- 
stances which  may  be  termed  by-products.  The  most  important  of 
these  by-products  are  paraffin  wax,  asphalt,  coke,  petrolatum,  and 
grease.  These  products  are  used  in  their  crude  state  and  also  form 
the  basis  for  the  manufacture  of  secondary  products,  an  application 
particularly  true  of  wax  and  petrolatum.  The  petroleum  industry, 
therefore,  affords  an  example  of  multiple  production,  the  fabrication 
of  expanding  series  of  products  from  a  single  raw  material. 

The  Development  of  By-products.^ — Industries,  such  as  the 
petroleum  industry,  engaged  in  the  extraction  of  values  from  raw 
materials,  have  developed  under  the  influence  of  demands  for  one 
or  more  products,  and  only  under  ideal  conditions  do  those  demands 
become  so  balanced  as  to  cause  a  complete  extraction  of  the  values 
present,  thus  leading  to  full  utilization  of  the  raw  material.  Usually 
an  industry  in  the  early  stages  of  its  development  produces  one  or 
more  main  products,  and  rejects  what  is  left  over  as  waste.  This 
waste  is  regarded  as  a  necessary  accompaniment  of  production,  and 
is  discarded  in  lack  of  a  demand  calling  for  its  use.  As  such  indus- 
tries develop,  products  of  value  come  to  be  fabricated  from  the  so- 
called  waste,  the  activity  then  turning  out  by-products  in  addition 
to  the  main  products,  and  less  waste.  But  the  development  of  by- 
products is  a  slow  process,  and  an  imposing  loss  of  potential  values 
accrues  by  this  delay.  When  maturely  developed,  an  industrial 
activity  produces  main  products  balanced  in  respect  to  demands, 
by-products  fully  developed  to  current  needs,  and  no  waste.  There 
are  few  activities  in  the  United  States  that  have  attained  this  measure 
of  effectiveness. 

In  the  course  of  industrial  growth,  the  output  of  main  products  is 
under  the  control  of  a  natural  law  whereby  supply  and  demand  seek 
mutually  and  automatically  to  affect  a  balance  against  disturbing 

*  For  a  detailed  discussion  of  the  economic  role  of  by-products,  see  C.  G. 
Gilbert  and  J.  E.  Pop;ue,  The  En(>rgy  Resources  of  the  United  States,  Bull. 
102,  vol.  1,  U.  S.  National  Museum,  pp.  95-97. 

183 


184 


PETROLEUM     BY-PRODUCTS 


external  factors.  The  production  of  waste  and  by-products,  how- 
ever, is  under  no  such  control,  but  is  determined  by  the  output 
of  main  products.  Hence  the  supply  of  incidental  products  tends 
always  to  exceed  the  demand.  Industry  itseK  inclines  to  bring 
these  products  into  use,  but  is  limited  by  restrictive  circumstances 
common  to  American  economic  practice.  The  industrial  activity 
is  often  too  small  or  poorly  organized  to  make  by-product  recoveries, 
which  usually  gain  their  value  from  a  cumulative  effect  possible  only 
under  large-scale  operations.  If  the  activity  is  financially  strong  and 
efficiently  organized,  it  tends  to  build  up  by-products  in  so  far  as 
they  are  end-products  that  may  enter  immediately  into  consumption. 
Small  pendent  industries  may  even  be  added  in  order  to  make  the 
conversion. 

But  if  the  potential  by-products  are  of  the  intermediate  order, 
requiring  outside  industries  to  carrj'"  them  forward  into  use,  and  the 
requisite  industrial  activities  are  lacking,  inadequate,  or  too  foreign 
in  scope  to  be  built  up  by  the  parent  activity,  the  whole  matter  gets 
beyond  the  reach  of  industrial  stimulus.  Such  is  the  case  with  the 
majority  of  by-product  possibilities.  The  parent  industry  can  do 
little  or  nothing;  independent  activities  to  handle  such  materials 
are  slow  to  develop,  hampered  by  the  uncertainties  of  a  supply  fluc- 
tuating independently  of  the  pressure  of  their  demands,  hesitating 
to  build  at  the  mercy  of  conditions  beyond  their  control. 

But  apart  from  these  handicaps,  where  profits  are  readily  attain- 
able from  the  main  products,  there  is  little  pressure  forcing  attention 
to  by-product  accomplishments.  The  loss  involved  in  the  non- 
development  is  not  felt  as  such.  Under  pioneer  conditions  and  in  a 
new  country  richly  endowed  with  opportunities  for  quantity  pro- 
duction, the  intricacies  of  by-product  upbuilding  are  not  apt  to  be 
thoroughly  sounded. 

Table  80. — Production  of  Paraffin  Wax  in  the  United  States 


Year 

In  Millions  of 

In  Percentages  of 

Pounds 

Production  in  1914 

1899* 

256 

67 

1904* 

262 

69 

1909* 

313 

82 

1914* 

380 

100 

1916 1 

386 

101 

1917 1 

481 

127 

1918 1 

505 

133 

1919t 

467 

123 

1920 1 

541 

142 

*  Census  of  Manufactures 


t  U.  S.  Bureau  of  Mines 


PARAFFIN  WAX 


185 


Such  is  the  case  with  petroleum.  Chemically  without  equal  in 
its  by-product  possibilities,  this  substance  has  been  developed  with 
prime  regard  to  its  main  products,  and  with  but  the  merest  beginning 
toward  the  realization  of  its  by-product  values. 


PRODUCTION 


MILLIONS 
OF 

POUNDS 

40 
20 


20, 
10 

o' 


10 

'is 


~\ 


STOCKS  ON  HAND 


N'^rtT^^^-^^'^^T^?^ 


1919 


EAST  COAST 


1920 


1919 


1920 


Fig.  8G. — Produotioii  and  stocks  of  paraffin  wax  in  the  various  refinery  districts 
of  the  United  States  by  months,  1919-1920. 

Paraffin  Wax. — Paraffin  wax  is  produced  in  large  quantities 
because  it  must  be  removed  in  the  refining  of  paraffin  crudes  from 
which  lu])ricating  oils  are  manufactured.  In  consequence,  large 
supplies  of  this  connnodity  have  tended  to  accumulate,  in  spite  of 


186 


PETROLEUM     BY-PRODUCTS 


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187 


its  rather  ready  application  without  intricate  fabrication  to  a  grow- 
ing variety  of  uses. 

The  production  of  paraffin  wax  for  the  years  enjoying  a  statistical 
record  is  shown  in  Table  80. 

The  production  and  stocks  of  paraffin  wax  in  the  various  refinery 
districts  in  the  United  States  are  shown  graphically  by  months  for 
1919  and  1920  in  Fig.  86,  with  the  supporting  data  given  in  Table  81. 
It  is  to  be  noted  that  the  stocks  relative  to  output  are  unusually  large. 

Asphalt. — Asphalt  is  mined  in  its  natural  condition  and  extracted 
from  crude  petroleum  of  asphaltic  base.  Native  asphalt  is  obtained 
largely  from  the  famous  pitch  lake  in  Trinidad.  Petroleum  asphalt 
is  derived  largely  from  California,  Gulf  Coast,  and  Mexican  crudes. 

The  production  and  imports  of  asphalt  of  various  types  for  the 
United  States  are  given  in  Table  82. 


Table  82. — Marketed    Pkoduction    axd    Imports   of   Asphalt   by   Years, 

1913-1920 

Data  from  U.  S.  Geological  Survey 

(In  thousands  of  short  tons) 


Produced 

Produced  in 

Domestic 

Imports, 
Native 

Year 

from  Domestic 

U.S.  from  Mexican 

Production, 

Petroleum 

Petroleum 

Native* 

1913 

437 

114 

93 

207 

1914 

361 

314 

80 

137 

1915 

665 

388 

76 

135 

1916 

688 

572 

98 

147 

1917 

702 

646 

82 

187 

1918 

605 

598 

60 

115 

1919 

615 

675 

88 

105 

1920 1 

688 

1044 

199 

127 

*  Includes  related  bitumens 
t  Estimated. 

The  production  and  stocks  of  asphalt  in  the  United  States  by 
months  during  1919  and  1920  are  shown  in  Fig.  87,  the  supporting 
data  being  given  in  Table  83.  It  is  apparent  that  the  bulk  of  the 
asphalt  is  manufactured  on  the  East  Coast  (from  Mexican  petroleum), 
in  the  Gulf  States  of  Texas  and  Louisiana,  and  in  California. 

Coke. — Petroleum  coke  is  the  residue  left  from  the  destructive 
distillation  of  crude  oil.  It  is  used  as  fuel  and  for  the  manufacture  of 
electrodes.  Its  production  in  the  United  States  by  years  from  1914 
to  1920  is  shown  in  Table  84. 


188 


PETROLEUM     BY-PRODUCTS 


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& 

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OO—      —  CIO      c-.c-.x      l^Xt^ 


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—  —  C-. 


3       XOM 


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•  r^  ci     odd 


odo> 


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C-.  X  ;•.      X  o  L-:      X  X  C-. 


cc  in  o      m  o  OS     TO  X  t- 
-*r-t^      rfcioa     t~c^n 


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oco     o 


X  OO 


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t^  L-  c:        —  Tf  "*        CO  lo  Tl< 


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t^  -^  t~ 


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ocio      ^cio      C —  ci-r      — 


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TO  t^  'l"       TO  -<  m 


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o:ci-i<      o-r— 1      ^xx      cv  O  — 


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oxr- 


inot^ 


•»  O  ■>1<       C»  O  lO 

or^x     xoo     O'^oo     —1—100 


OTOO       ox  ' 


:  C;  TO       OCX       O 

TOO      t-.  -r  CI      o 


OTOO       TfOO       — lOTO       TOTOO 


■  >>2 


5? 


■3        5''^  3 
<5       <g.^ 


•  3  « 


O    O   O 

02Q 


THOUSANDS 


PRODUCTION 


ASHPHALT  189 

STOCKS  ON  HAND 


EAST  COAST 


ILL.-IND.  etc. 
KAN.-OKLA.  etc. 


1919  1920  1919  1920 

Fig.  87. — Production  and  stocks  of  petroleum  asphalt  in  the  various  refinery 

districts  of  the  United  States  by  months,  1919-1920. 

Table  84. — Production  of  Petroleum  Coke  in  the  United  States 


Year 

In  Thousands 
of  Tons 

In  Percentages  of 

the  Production  in 

1914 

1914* 
1916t 
1917t 
1918t 
1919t 
1920t 

214 
405 
539 
560 
603 
577 

100 
189 
252 
262 
282 
270 

*  Census  of  Manufactures. 


t  U.  S.  Bureau  of  Mines. 


190 


PETROLEUM     BY-PRODUCTS 


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02 


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d-^^ 

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CDCDOC 

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PETROLATUM 


191 


The  current  trend  of  the  production  and  stocks  of  petroleum  coke 
by  months  for  1919  and  1920  is  given  in  Fig.  88,  with  the  supporting 
data  in  Table  85. 


PRODUCTION 


STOCKS  ON  HAND 


30 
25 

20 
15 
10 

5 

O 

5 

O 

20 

15 
10 

:i 

io 

5 
O 

15n 
io 

5 


O 


^^^sssiiisi^i:/ 


K.-^, 


1919 


,-^y 


1920 


EAST   COAST 


ILL..  IND.    ETC. 


KAN.  -OKLA.   ETC. 


WYO.  -  COLO.    ETC. 


1919 


1920 


Fig.  88. — Production  and  stocks  of  petroleum  coke  in  the  vtirious  refinery  districts 
of  the  United  States  by  months,  1919-1920. 

Petrolatum. — Petrolatum,  the  basis  of  vaseline  and  widely  used 
in  pharmaceutical  preparations,  is  a  petroleum  product  of  especial 
interest  by  virtue  of  its  extensive  use  in  various  fabricated  forms.  It 
is  one  of  the  few  by-products  of  petroleum  which  has  suljstantially 


192 


PETROLEUM     BY-PRODUCTS 


measured  up  to  its  capabilities.     The  production  of  petrolatum  for 
a  few  recent  years  is  shown  in  Table  86. 

Table  8G. — The  Production  of  Petrolatum  in  tbde  United  States 


Year                  Production, 

Millions  of  Gallons 

Value, 
Millions  of  Dollars 

1914*                  6.07 
1919*                10.23 
1920 1                 6.79 

1.24 
3.75 

*  Census  of  Manufactures. 

t  U.  S.  Bureau  of  Mines.     The  product  reported  is  not  homogeneous  with  that  given  above 
for  1914  and  1919. 

Prices  of  various  grades  of  petrolatum   in  January,   1921,  are 
shown  in  Table  87. 


Table  87. — Wholesale  Prices  of  Petrolatum,  January,  1921 


Grade 

Cents  per  Gallon 

Snow  white 

18 

15 
12 

7 
6 

5.5 
5.25 

Lily  white 

Cream  petroleum  jelly .... 
Amber 

Dark  amber 

Veterinary 

Dark  green 

Greases. — There  are  no  satisfactory  commercial  lubricants  of 
hydrocarbon  or  fatty-oil  origin  that  are  sufficiently  thick  and  other- 
wise suitable  for  the  lubrication  of  all  types  of  transmissions;  hence 
it  has  been  necessary  to  find  a  means  of  artificially  thickening  avail- 
able oils  to  the  desired  consistency.  Various  types  of  greases  (thick- 
ened oils)  are  manufactured  to  meet  this  need. 

Greases  are  saponified  fatty  oils,  of  either  animal  or  vegetable 
origin,  which  are  combined  with  viscous  hydrocarbon  oils.  Most 
trade-marked  greases  are  scented  and  dyed.  Greases  are  used  for 
transmissions,  gears,  axles,  and  other  types  of  lubrication  requiring  a 
highly  viscous  product.  A  characteristic  grease  is  axle-grease;  many 
products  of  this  tj^pe  contain  mineral  matter,  such  as  mica  or  graphite. 

The  production  of  greases  in  tlie  United  States  for  the  latest  year 
for  which  figures  are  available  is  given  in  Table  88. 


MEDICINAL  OILS 


193 


Table  88. — Production  of  Greases  in  the  United  States  in  1914  and  1919 
Data  from  U.  S.  Census  of  Manufactures 


Types 

1914 

1 

1919 

1 

Quantity, 

Thousand 

Gallons 

Value, 

Thousand 

Dollars 

Average 
Price, 
Cents 

Per 
Gallon 

Quantity, 

Thousand 

Gallons 

Value, 

Thousand 

Dollars 

Average 
Price, 
Cents 

Per 
Gallon 

Lubricating  greases. 
Axle  greases 

4980 
2948 

1625 
668 

32.6 
22.6 

12,599 
5,318 

6044 
2103 

48.0 
39.6 

Medicinal  Oils. — Oils  with  medicinal  properties  are  manufactured 
from  petroleum  in  considerable  quantities.  Formerly  such  oils  were 
obtained  almost  entirely  from  abroad,  but  the  American  products 
have  almost  supplanted  the  imported  varieties.  The  production  of 
medicinal  oils  in  1919  and  1920  is  shown  in  Table  89. 


Table  89. — Production  of  Medicinal  Petroleum  Oils  in  the  United  States, 

1919-1920 


1919 
1920 

1,129,932  gallons 
1,375,081  gallons 

The  price  of  various   grades  of  mineral  medicinal  oils  in  Jan- 
uary, 1921,  is  shown  in  Table  90. 


Table  90. — Price  of  Heavy  White  Mineral  Medicinal  Oil   in  January, 

1921 


Grade 


Per  Gallon 


880-885  specific  gravity .  .  .  |  $1 .  75 
865-870  specific  gravity .  .  .  j  1 .  20 
850  specific  gravity ...  I         1 .  00 


Miscellaneous  Products. — The  U.  S.  Bureau  of  Mines  in  its 
monthly  reports  on  the  refinery  output  of  the  United  States  includes 
a  group  of  miscellaneous  products.  The  composition  of  this  group 
for  the  years  1919  and  1920  is  shown  in  Table  91. 


194 


PETROLEUM     BY-PRODUCTS 


Table  91. — Output  of  Miscellaneous  Petroleum  Pkoducts  in  the  United 

States,  1919-1920 

Data  from  U.  S.  Bureau  of  Mines 

(In  thousands  of  gallons) 


1919 


Binder 

Flux 

Medicinal  oUs. . 
Paint  products. 
Petrolatum .... 

Road  oil 

Roofer's  wax. . . 
Sludge  products 

Acid  oil 

Bottoms 

Distillates 

Pitch 

Residue 

Slops 

Tailings 

Tar 

Tops 

Unfinished 

Wash  out 

Wax  tailings .  .  . 
Others 

Total .  .  . 


1,685 

1,786 

31,285 

34,710 

1,130 

1,375 

76 

351 

6,421 

6,794 

77,638 

60,789 

158 

177 

14,994 

19,230 

3,766 

5,379 

14 

571,238 

787,685 

474 

242 

40 

6 

379 

837 

19,326 

5,907 

3,545 

4,682 

108,956 

107,901 

376,229 

451,267 

122 

33 

3,017 

3,417 

58,387 

1,278,864 


1,492,584 


The  Future  of  Petroleum  By-products. — A  considerable  range  of 
by-products  has  alread}^  been  manufactured  from  a  portion  of  the 
crude  petroleum  brought  into  use;  but  the  possibilities  in  this 
direction  are  much  greater  than  the  attainments  and  the  bulk  of 
crude  petroleum  utilized  yields  few,  if  any,  by-product  values.  The 
by-product  accomplishments  of  the  more  progressive  portion  of  the 
petroleum  industry  are  shown  in  Fig.  89. 

As  crude  petroleum  advances  in  price  and  further  attention  is 
accorded  chemical  research,  an  enlarging  by-product  return  may  be 
counted  on  in  the  petroleum  industrj'.  Petroleum  and  coal-tar  are 
the  chief  raw  materials  of  synthetic  organic  chemistry,  and  the  values 
hidden  in  these  two  substances,  as  already  so  well  demonstrated  in 
the  case  of  coal-tar,  can  scarcely  be  overestimated. 


Liquefied  Gases- 


Petroleum  Ether tpdmlnn  Motors  ) 


Hydrocarbon  -< 


Alcohols 
Carbon  Black 


PETROLEUM 

(Raraffine  Base  "1 
JNaphthenlc  Base( 
|AsDhalt(c  Base  [ 
[Mixed  Bases         J 


Oil                  \oa>Manutaciiira 
les  &  Road  Oils /Oxidized  AsphalK  — j  Fell  Baturatmg 

1=— ■ 

Coke — (Fuel) 

Acids  ["'"'"'"""""*'"'"'■ 
— iDB-Bmul.ltylnB  Agentt 


i  &  Pitches— J 


huric  Add— (Fertillzf 


Fig.  89.— The  principal  oommercial  products  of  petroleum. 

(CourUiy  of  the  Standard  Oil  Company  of  N«ip  Jertty) 


■right.  f»21.  Standato 


CHAPTER  XIV 
NATURAL  GAS  AND  NATURAL-GAS  GASOLINE  ^ 

Natural  gas  occurs  in  intimate  association  with  petroleum  and 
independently  in  gas-pools  in  the  proximity  of  oil  deposits.  This 
substance  is  accordingly  commercially  produced  not  only  as  a  by- 
product of  petroleum  but  separately  as  a  distinctive  undertaking. 
The  bulk  of  the  natural  gas  consumed  in  the  United  States  is  brought 
into  use  by  large  corporations  oi^erating  as  public  utilities,  but 
quantities  of  gas  are  also  disposed  of  by  oil-producing  companies. 

The  magnitude  of  natural-gas  service  in  the  United  States  is  not 
generally  appreciated.  Large  sections  of  the  country  have  long 
been  partly  to  wholly  dependent  upon  this  ideal  fuel.  Domestic 
consumers  number  upward  of  2|  million,  and  billions  of  cubic  feet 
are  annually  employed  for  industrial  heating  and  the  generation  of 
power.  The  consumption  of  natural  gas  in  the  United  States  in  1919 
in  comparison  with  the  quantity  of  artificial  city-gas  used  in  that 
year  is  shown  in  Table  92. 

Table  92. — Consumption  of  Natural  Gas  Compared  with  the  Utilization 

OF  City-gas  in  the  United  S^tates  in  1919 

Data  from  U.  S.  Geological  Survey  and  American  Gas  Association 

{In  millions  of  M .  cubic  feet) 


City  gas: 

Carburetted  water-gas . 

Coal-gas 

Oil-gas 

Surplus  l3y-])r()(luct  gas 

Total 

Natural  gas 


*  Includes  some  gas  made  by  other  processes. 

1  It  is  impossible  .to  discuss  natural  gas  adequately  without  drawing  upon  the 
work  if  S.  S.  Wyer,  who  has  done  so  much  to  elucidate  the  natural  gas  situation. 
For  a  detailed  discussion  of  this  subject,  reference  may  be  had  to  Wyer,  Natural 
Gas:  Its  Production,  Source,  and  Conservation,  Bull.  102,  Pt.  7,  U.  S.  National 
Musuem,  Smithsonian  Institution,  1918. 

195 


196 


NATURAL  GAS   AND   NATURAL-GAS   GASOLINE 


Consumption  of  Natural  Gas. — The  actual  production  of  natural 
gas  in  the  United  States  is  not  known,  since  billions  of  cubic  feet  are 
wasted,  used  in  the  field,  and  otherwise  unaccounted  for.  The  quan- 
tity entering  into  consumption,  however,  is  a  matter  of  statistical 
record  and  is  shown  in  Table  93  for  the  period  1915-1919.  It  will  be 
observed  that  the  bulk  of  the  gas  is  employed  for  industrial  purposes, 
the  ratio  of  domestic  consumption  to  total  consumption  being  35 
per  cent  in  1915,  31  per  cent  in  1916,  32  per  cent  in  1917,  and  38  per 
cent  in  1918. 

Table  93. — Consumption  of  Natural  Gas  in  the  United  States  by  Years, 

1915-1919 

Data  from  U.  S.  Geological  Survey 


Ga8  Consumed 

No.  of 
Pro- 

Number of 
Consumers 

Domestic 

Industrial 

Total 

ducers, 

Units 
of  1 

Domestic, 

Units  of 

1000 

Indus- 

Volume, 

Average 

Volume, 

Average 

Volume, 

Average 

trial, 

Units  of 

Price, 

Units  of 

Price, 

Units  of 

Price, 

Units  of 

1,000,000 

Cents 

1,000,000 

Cents, 

1,000,000 

Cents 

1 

M. 

per  M. 

M. 

per  M. 

M. 

per  M. 

1915 

7205 

2195 

18,358 

217 

28.32 

411 

9.68 

628 

16.12 

1916 

7697 

2362 

18,278 

235 

28.63 

518 

10.21 

753 

15.96 

1917 

7573 

2431 

18,620 

258 

30.76 

537 

11.67 

795 

17.87 

1918 

7101 

2509 

16,581 

271 

31.35 

450 

15.23 

721 

21.29 

1919* 

639 

25.00 

1 

*  Estimated. 


The  trend  of  the  consumption  of  natural  gas  in  the  United  States 
over  the  period  1906-1919,  divided  into  its  domestic  and  industrial 
components,  is  shown  in  Fig.  90.  This  chart  indicates  that  the  con- 
sumption of  natural  gas  reached  its  maximum  in  1917  and  there- 
after has  shown  a  decline  at  approximately  the  same  rate  that  char- 
acterized its  previous  increase.  The  diagram  illustrates  the  fact, 
already  too  well  known  in  all  natural-gas  consuming  regions,  that 
the  annual  output  of  this  fuel  has  passed  its  maximum,  and  con- 
sumption is  consequently  suffering  progressive  curtailment.  This 
outcome  carries  additional  interest  in  that  it  presages  what  will 
inevitable  overtake  the  petroleum  resource.  In  the  words  of  the 
Director  of  the  U.  S.  Geological  Survey:  "Natural  gas  is  a  mine 
that  is  largely  worked  out;  it  has  seen  its  best  days  and  future 
dividends  to  the  nation  cannot  equal  those  of  the  past." 


CONSUMPTION  OF   NATURAL  GAS 


197 


QUANTITY 

SCALE 
1000 

900 

800 
700 
600 


100 
90 
80 
70 
60 
50 
40 


1 

,.AM  fMllluONS 

OFjIL 

ilSi''*' 

coNS'J!i:> 

c^ 

Fli- 

^ 

\o2^ 

\1ILLI0NS_°£ 

^Z 

.^> 

JSTRIA 

L   CON 

s^ 

L/ 

SUjvjp 

..o^Sli!^ 

iS^ 

3*^ 

h^ 

- 

0< 

>MES1 

fi-^ 

on»*s 

^ 

^ 

^VJ»«PT>0V*j^ 

po^:^ 

.       Ot<! 

roiet- 

r 

^.^^ 

r 

^ 

f^ 

SCALE    OF 
PERCENTAGE 
INCREASE  OR 

DECREASE 
+  100^ 


+  60 
+  40 
+  20 

0 

-  10 

-  20 
-30 

-  40 

-  50* 


19061907  1908  1909  1910  1911  1912  1913  1914  1  9  1  5  1  9  1  6  1917  1918   1919  1920  1921 
Fig.  90. — Trend  of  the  production  and  value  of  the  natural  gas  consumed  in  the 
United  States  by  years,  1906-1919;   data  from  U.  S.  Geological  Survey. 

Table  94. — Acreage  Controlled  by  Natural-gas  Producers  in  the  United 

States  in  1918 

Data  from  U.  S.  Geological  Survey 

{In  thousands  of  acres) 


Natural-gas  Acreage 

In  fee 

1,081 

12,343 

1,154 

Leased         .    . 

Gas  rights 

Total 

14,578 

About  60  per  cent  of  the  total  consumption  of  natural  gas  is 
utilized  in  the  three  states  of  Pennsylvania,  Ohio,  and  West  Virginia, 
where  this  product  has  not  only  given  a  cheap  and  convenient  domes- 
tic service,  but  has  also  exerted  a  marked  effect,  now  nearing  its 


198 


NATURAL   GAS   AND   NATURAL-GAS   GASOLINE 


PER 
CENT 

100 


r~~llNDUSTRIAL      [77^  DOMESTIC 


90 


PENNSYLVANIA 


70 


WEST   VIRGINIA 


close,  upon  the  industrial  opportunity  afforded  by  those  sections. 

The  relative  importance 
of  the  industrial  and  do- 
mestic role  of  natural  gas 
in  the  leading  gas-con- 
suming states  is  shown 
graphically  in  Fig.  91. 

Production  of  Natural 
Gas. — The  production  of 
natural  gas,  from  an  en- 
gineering standpoint,  is 
quite  similar  to  the  pro- 
duction of  petroleum,  the 
two  products  in  many 
instances  being  turned 
out  jointly  from  the 
same  well,  although  the 
bulk  of  the  natural  gas 
consumed  is  drawn  from 
gas-wells  in  gas-fields. 
(See  Fig.  92.) 

The  acreage  controlled 
by  natural-gas  producers 
in  the  United  States  in 
1918,  is  shown  in  Table 
94. 

The   number  of  gas- 
wells  and  the  extent  of 
drilHng  activity  in  1918 
for    natural    gas     com- 
pared    with     petroleum 
are  shown  in  Table  95. 
A   feature  especially   to 
be  noted  in  Table  95  is 
the  fact   that    in    1918, 
7  per   cent   of  the   nat- 
ural-gas wells  were  aban- 
FiG.  91.— Relation  of  industrial  and  domestic  con-    floned,      whereas        only 
sumption  of  natural  gas  in  the  United  States  in    3   per   cent  of   the  petro- 
1918-  leum  wells  ceased  to  be 

productive.  The  aver- 
age life  of  natural-gas  wells  for  the  entire  country  is  about  8  years; 
the  average  petroleum  well  is  longer-lived. 


50 


40 


30 


20 


10 


J 


OKLAHOMA 


CALIFORNIA 


I       I       '       I 


•■.•;  21    OTHER   STATES 


JI3 


20  40  CO  80  100% 

IN    RECTANGLES  ARE    MILLIONS   OF   M.  CU.  FT. 


USE 


e  r  for  separating  vapors  mr  to  determine  volume  of  gas  delivered  into 

asoond,  through  which  the  g 
fofater  in  order  to  cool  the  i 
agpression.  gas  is  reduced  from  medium  pressure  to  low 

ptural  gas  transmission  lin« 
Jting  plant. 

Li;^     1     „4^j     I  •    ind  consumer's  premises. 

J  e  hne  located  along  mam  ,       ^  ui     4.u     ow      •,.•       j 

"^^^  der  to  enable  the  212  million  domestic  con- 

ssan  walking  along  line  on  1^  must  be  continuity  of  service  between  this 

nam  transmission  lines  ar^e  field. 


JIRED  TO  ULTI 


To  fate  page  19S 


PRODUCTION 


TRANSMISSION 


Fig.  92— How  Natural  Gas  is  Found.  Reduced  to  Possession.  Transmitted  and  Delivered  to  Ultimate  Consumer. 


PRODUCTION   OF   NATURAL   GAS 


199 


Table  95. — Well  Data  for  Natural  Gas  and  Petroleum  in  tue  United 

States  in  1918 
Data  from  U.  S.  Geological  Survey 


Natur.^l  Gas 

Petroleum 

Ponn. 

Ohio 

W,  Va. 

Total  I'.S. 

Total  U.  S. 

Productive  wells,  Jan 
DrUled  in  1918: 
Gas     

1, 1918. 

14,534 

1,276 

258 

5979 

614 
297 

9329 

718 
170 

39,283 

3,808 
1,508 

197,149 

12,111* 
3,135 

Dry 

Total 

1,534 

566 
15,244 

911 

425 
6168 

888 

360 

9687 

5,316 

2,722 
40,369 

15,246 

5,885 
203,375 

.  Abandoned  in  1918 . 
Productive,  Dec.  31, 

1918... 

*  Oil-wells. 

The  effective  production  of  natural  gas,  from  hundreds  of  wells 
and  widely  scattered  pools,  is  inherently  a  large-scale  enterprise, 
involving  a  continuity  of  service  from  the  field  to  the  consumer. 
This  aspect  of  the  natural-gas  industry  is  illustrated  in  Fig.  93  by  a 
map  of  the  properties,  compressing  stations  and  transmission  lines  of  a 
large  public-service  corporation  dealing  in  this  product.  The  map  is 
reproduced  from  a  report  by  S.  S.  Wj^er. 

Natural  gas  occurs  underground  under  a  natural  pressure  termed 
its  rock-pressure,  and  as  the  gas  is  produced  the  rock-pressure  declines. 
The  relationship  of  pressure  to  volume  is  definite,  and  in  general  a 
decline  in  rock-pressure  of  a  given  percentage  means  that  the  volume 
of  gas  in  the  underground  reservoir  has  been  reduced  in  like  degree. 
A  decline  in  rock-pressure,  however,  not  only  indicates  that  the 
ultimate  supply  is  being  depleted,  but  it  also  reduces  the  delivering 
capacity  of  the  gas-well  and  thus  results  in  a  declining  rate  of  output. 
Ultimately  the  rock-pressure  falls  below  the  point  at  which  the  gas 
will  flow  into  the  receiving  lines  and  either  the  well  must  be  aban- 
doned or  a  compressor  must  be  installed  for  increasing  the  pressure 
of  the  gas.  The  trend  of  the  average  rock-pressure  of  a  pool  or  a 
field  gives  a  basis  for  estimating  the  future  life  of  the  deposit.  The 
average  dechne  in  rock-pressure,  based  on  the  performance  of  some 
2500  wells  in  nearly  all  of  the  productive  districts  of  Pennsylvania 
and  New  York,  is  siiown  in  Fig.  04  for  the  period  190()-1919,  with  a 
projection  ahead. ^     It  appeals  fi-om  this  cluul   that  from  1906  to 

'  Data  from  W.  Irwin  Moyor,  The  Natural-gas  Fields  of  ICastorn  United 
States  and  Their  Probable  Future  Life,  Nat.  Gas  Assoc.  America,  May,  1920. 


200 


NATURAL  GAS  AND   NATURAL-GAS   GASOLINE 


1919   the   average   rock-pressure   in   West   Virginia   declined   about 
70  per  cent  and  in  Pennsylvania,  about  65  per  cent;   and  that  at  its 


^\      /      BRAXTON     "^ 

X        ^1 


LEGEND 

^^     OaS  F'i£U3 


Fig.  93. — Map  of  natural  gas  property  of  the  Philadelphia  Company  in  Penn- 
sylvania and  West  Virginia  as  of  Jan.  1,  1920;  after  S.  S.  Wyer. 

past  rate  of  decline  the  pressure  will  reach  20  pounds  in  1942  for 
West  Virginia  and  20  pounds  in  1948  for  Pennsylvania. 

Transmission  of  Natural  Gas. — The  transportation  of  natural  gas 
is  an  important  step  linking  production  with  utilization.     As  with 


> 


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WWg^iaTitli[i«griili:iir4TB|i\<litM|...,ipf'r-  - 


MAP 

\  SHOWING 

NATURAL  GAS  USING  TOWNS 

AND 

NATURAL  GAS 
MAIN  TRANSMISSION  LINES 

BASED  ON  DATA  COMPILED  BY 

THE  U.  S.  GEOLOGICAL  SURVEY 

WASHINOTON.  D.C. 
JAN.  1.  leis 


ffattmi/OeaMatn  ThutmiimenLiMm  - 


Fio.  95.-M.P  showing  the  towns 


owns  using  natural  gas  and  the  main  natural-*"  ?^"iK-iun  lines  in  the  northeastern  part  of  the  Unit.-J  States,  based  on  data 
piled  by  the  U.  S.  Geological  Survey,  Jan.  1,  l^l'^  *^'  *'  ■"'  ^yer,  Bull.  102,  pt.  7,  Smithsonian  Institution. 


TRANSMISSION   OF   NATURAL  GAS 


201 


petroleum,  an  extensive  system  of  pipe-lines  is  employed  for  this 
purpose.  The  extent  of  the  transmission  system  in  the  great  natural- 
gas  region  of  Pennsylvania,  Ohio,  West  Virginia,  and  adjacent  parts 
of  New  York,  Maryland,  Kentucky,  and  Indiana,  is  indicated  by  a 
map  of  this  teiTitory  showing  the  towns  dependent  upon  natural  gas 


lOOC 
,900 
800 
TOO 
600 

500 

400 


lOO 
90 
80 
70 
60 

50 


1 

s^. 

"^^ 

^V^WEST   VIF 

GINIA 

K 

f\ 

PENN.      ^\A. 

V 

\\ 

w 

\  \^ 

\  \ 

\ 

\ 

\ 

IN 
PER   CENT 

lOO 
90 
80 
70 
60 
50 
40 


20 


Fig.  94. — Typical  rock  pressure  decline  in  natural  gas  fields  of  Pennsylvania  and 
West  Virginia,  1906-1919,  with  trend  projected  to  1950;  data  from  W.  I. 
Moyer,  Nat.  Gas  Assoc,  of  America. 


and  the  main  transmission  lines  engaged  in  its  distribution.     (See 
Fig.  95.) 

In  order  to  expedite  its  transmission,  the  gas  is  compressed  in 
stations  along  the  line.  Compression  decreases  the  volume  of  the 
gas  and  increases  its  pressure.  Gas  is  ordinarily  raised  to  pressures 
of  200  to  400  pounds  for  transmission;  and  owing  to  the  drop  in 
pressure  resulting  from  friction  as  the  gas  proceeds,  recompression 
in  successive  stations  becomes  necessar}^     The  gas  travels  at  enor- 


202 


NATURAL  GAS  AND   NATURAL-GAS   GASOLINE 


mous  velocities  in  the  mains,  exceeding  the  speed  of  the  fastest  trains. 
As  the  rock-pressures  of  gas-wells  decline,  the  capacity  of  the 
compressor  station  is  lowered.  A  growing  compressor  installation  is 
in  conscciucnce  called  for  as  the  gas-fields  age. 

Utilization  of  Natural  Gas. — The  utilization  of  natural-gas  is 
profoundly  affected  by  a  highly  variable  load  factor  which  fluctuates 
with  the  season  and  also  with  the  time  of  the  day.     The  load  factor 

varies  more  widely 
with  domestic  con- 
sumption than  with 
industrial  consump- 
tion, and  natural-gas 
companies  attempt  to 
equalize  the  domestic 
load  with  industrial 
sales.  The  monthly 
domestic  load  of  a 
typical  natural  -  gas 
company  is  shown  in 
Fig.  96,  while  the 
hourly  load  of  a  day 
in  winter  is  given  in 
Fig.  97. 

As  in  the  case  of 
artificial  gas,  the  ap- 
pliances employed  in 
the  utilization  of  nat- 
ui-al  gas  are  extremely 
wasteful  and  little 
advance  has  been 
made  in  their  efficien- 
cy in  the  past  twenty 
years.  The  field  of 
gas  stands  to-day  in  striking  contrast  to  that  of  electricity,  where 
constant  effort  in  perfecting  the  appliance  is  responsible  for  nmch  of 
the  remarkable  advance  in  the  art  that  has  taken  place.  With  nat- 
ural gas,  the  lack  of  progress  on  this  score,  attributable  in  part  to  the 
prevalence  of  such  low  prices  for  natural  gas  that  the  product  was 
scarcely  worth  saving,  is  responsible  for  an  unduly  rapid  and  pre- 
mature depletion  of  the  resource. 

Price  of  Natural  Gas. — Natural  gas  possesses  a  heating-value 
nearly  doul^le  that  of  the  average  grade  of  city-gas,  yet  the  price  of 
natural  gas  has  averaged  around  one-fifth  the  price  of  city-gas  on  a 


CU.  FT.  OF  GAS 

USED  PER  MONTH 

3,250,000,000 


3,000,000,000 


2,750,000,000 


2,500,000,000 


2,250,000,000 


2,000,000,000 


1,750,000,000 

1,600,000,000 
1,500,000,000 


1,250,000,000 


1,000,000,000 


750,000,000 


500,000,000 


250,000,000 


000,000,000 


> 

V 

/ 

\ 

1 

\ 

\ 

/ 

\ 

V 

j 

' 

\ 

\ 

\ 

— 

AVE 

R.    I 

oac 

52 

—  ■ 

i  oi 

PE 

AK 

.OAI 

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—  • 

/ 

\ 

/ 

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1 

\ 

^ 

/ 

' 

JULY  AUG.  SEP.  OCT.  NOV.  DEC.  JAN.  FEB. MAR.  APR.  MAY  JUNE 
MONTHS 

Fig.  96. — Typical  monthly  domestic  load  of  a  natural 
jias  company;  after  S.  S.  Wyer. 


PRICE  OF   NATURAL  GAS 


203 


volume  basis,  or'  one-tenth  the  price  on  a  B.t.u.  basis.  This  dis- 
crepancy between  the  price  of  natural  gas  and  its  nearest  analogue 
is  highly  significant;  it  indicates  that  natural  gas  has  been  exploited 
and  sold  on  an  uneconomic  basis  of  opportunism;  that  the  country 
has  paid  for  its  natural-gas  service  with  a  portion  of  the  resource 
itself. 


HC 

cc 

UR 
FO 

N9 
LY 
R   i 

UM 
DE 
ER 

ER; 
MA 
VIC 

ND 

E- 

\ 

MUCH   OF  THE  EQUIPMENT    MUST    Bt    HtLU 
FOR  THIS    PEAK   LOAD  AND  WILL  BE   USED 
NOT    MORE  THAN   4    HOURS   DAILY   DURING, 
SAY,  20  OF  THE  COLDEST  DAYS  OF  THE  YEAR, 

THE   SMALLNESS  OF  THIS  IS  EVIDENT   FROM 
THE   FOLLOWING:     NUMBER   OF    HOURS    IN    A 
YEAR   IN   WHICH   THE   FIXED  CHARGES  ARE 
ACCRUING,    24   X   366  =  3760  =  100^    HOURS 
PEAK   LOAD   EQUIPMENT   IS   USED   4  X  20  = 

80=lr^ 

U.   FT.   OF  GAS   USED    PER   HOUR 

8              8 
8              8 

o                    o 

^ 

<^ 

/ 

—i 

V 

^ 

V 

s. 

OiiUO.UUU 

- 

/ 

1 

^1 

1 

" 

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VE 

RAC 
OF 

E 
PC 

LO/ 

D 
LC 

s 

)AD 

OOO 

f- 

\ 

12    1     23456789  10  11  12    1    23456789  lO  11  U2 

NOON 
TIME 

Fig.  97. — Typical  hourly  natural  gas  load  in  winter;   after  S.  S.  Wyer. 


A  comparison  of  the  prices  of  several  types  of  gas  for  a  number  of 
years  is  given  in  Table  96. 

Wastes  of  Natural  Gas. — It  is  difficult  to  describe  without  the  use 
of  superlatives  the  inefficient  manner  in  which  natural  gas  has  been 
exploited  in  the  United  States.  "  Of  all  the  pieces  of  extravagance 
of  which  the  American  people  have  been  guilty,  perhaps  their  reckless 
and  wasteful  use  of  natural  gas  is  the  most  striking.  .  .  .  "^  "  The 
history  of  the  natural-gas  industry  is  an  appalling  record  of  almost 

'  Van  Hise,  The  Conservation  of  Natural  Resources  in  the  United  States, 
p.  60. 


204 


NATURAL   GA8   AND   NATURAL-GAS  GASOLINE 


Table  96. — Average  Price  of  Natural  Gas  Compared  with  Price  of 

Various  Types  of  Manufactured  City-gas 

(Average  price  per  M.  cubic  feel) 


Year 

Natural  Gas 

Coal-gas 

I 

Oil-gas  and 
Water-gas 

Domestic      |      Industrial 

All 

1915 
1916 
1917 
1918 

SO. 2832          $0.0968 
.2863     :         .1021 
.3076              .1787 
.3135              .1523 

SO. 1612            SO.  92 
. 1596     ' 

. 1787               .  89 
.2129              1  01 

SO.  90 

.86 
.90 

unbelievable  waste. 


-i^or- 


80  — 


FrELD   AND 
MAIN   UNE   LOSS 


100   BILLION 


DISTRIBUTING 
PLANT   LOSS 


INDUSTRIAL 


200    BILLION  J 


The  common  inethofls  of  production,  trans- 
mission, and  use  have 
resulted  in  wasting 
more  gas  than  has  ever 
been  utilized."  1  "The 
annual  reports  of  the 
con.servation  commit- 
tee of  the  Natural  Gas 
Association  of  America 
are  stinging  indict- 
ments of  a  criminal 
system,  fostered  by 
both  the  gas  com- 
panies and  the  public, 
that  has  resulted  in 
wasting  more  gas  than 
has  ever  been  util- 
ized. "^ 

The  losses  of  nat- 
ural gas  arise  from  ex- 
cessive competition  in 
drilling,  hasty  pro- 
duction, leakage  in 
transmission,  ineffi- 
cient appliances,  im- 
proper utilization,  and 
many  other  causes.^ 
Many    of   these    con- 

1  Use  and  Conservation  of  Natural  Gas,  U.  S.  Fuel  Administration. 

2  S.  S.  Wyer,  Natural  Gas:    Its  Production,  Service  and  Conservation,  U.  S. 
National  Museum,  Bull.  102,  Pt.  7,  1918,  p.  51. 

'  See  Wyer,  loc.  cit.,  pp.  52-66,  for  a  detailed  account  of  natural-gas  wastes. 


.CONSUMERS  " 

I       WASTE      200    BILLION  ^ 


GAS   ACTUALLY 
UTILIZED    BY  IQO   BILLION 

INDUSTRIAL  &    DOMESTIC 
ULTIMATE  CONSUMERS 


Fig.  98. — Analysis  of  the  losses  involved  in  the  opera- 
tions of  a  large  gas  company;  after  S.  S.  Wyer. 


CONSERVATION   OF   NATURAL  GAS 


205 


ditions  are  subject  to  correction  and  the  life  of  the  resource 
would  be  materially  lengthened  if  the  matter  were  accorded  con- 
structive economic  and  engineering  treatment.  An  analysis  of  the 
operations  of  a  large  natural-gas .  company  made  bj^  Wyer  shows 
that  of  a  total  output  of  600  billion  cubic  feet  of  gas  in  the  course  of 
fourteen  years  of  operating  history,  only  17  per  cent  was  actually 
utilized  by  the  consumer  (see  Fig.  98).  A  view  of  the  average  waste 
of  natural  gas  by  the  domestic  consumer  is  given  in  Fig.  99;   it  is 


-VOOi 


95  — 


LEAKAGE  TN 
HOUSING   PIPING 
AND   FIXTURES 


5     45 


WASTEFUL    COMBUSTION    CONDITIONS   IN 
|(f()  USING   GAS   AT   HIGH    PRESSURES   AND    LONG 
I         FLAMES   FOR  COOKING 

l(^)  BURNING   GAS   AFTER    COOKING   IS    FINISHED 
l(t')  BURNING   GAS   BEFORE   FOOD    IS    READY  TO  COCK 
|((0  NOT  TURNING  GAS  DOWN  AFTER  BOILING  BEGINS 
|(f')  IMPROPER    MIXTURE   ADJUSTMENT 
l(^')  USELESS    RADIATION 
(■(/)  USING   MORE   HEAT   THAN    NEEDED 


20  — 


10; 


HEAT  UNITS 
ACTUALLY   UTILIZED 


Fig.  99. — Analysis  of  average  home  wastes  of  natural  gas;   after  S.  S.  Wyer, 
U.  S.  Bureau  of  Mines. 


estimated  by  Wyer  that  the  efficiency'  of  most  cooking  and  healing 
appliances  could  be  trebled  and  the  elimination  of  all  preventable 
wastes  in  domestic  consumption  would  "  add  fifteen  to  twenty  j-ears 
to  the  pei-iod  that  natural  gas  will  be  available  for  domestic  use."^ 

Conservation  of  Natural  Gas. — There  is  critical  need  for  increas- 
ing the  service  value  of  the  declining  sui^ply  of  natural  gas  by  elim- 
inating preventable  losses  in  its  production  and  transmission,  and  by 

^  Technical  Paper  257,  U.  S.  Bureau  of  Mines,  p.  21. 


200  NATURAL  GAS  AND  NATURAL-GAS  GASOLINE 

increasing  the  efficiency  of  its  utilization.     As  pointed  out  by  Wyer;! 

"  The  natural-gas  industry  is  in  a  transition  stage,  going  from  the 
large  volume  and  low-priced  Ijasis  of  the  past  to  the  small  volume  and 
inevitable  higher  price  of  the  future.  Strong  individualism  domi- 
nated the  past.  Public  policy  will  ultimately  require  that  legalized 
and  regulated  collective  co-operation,  rather  than  cut-throat  compe- 
tition, dominate  the  future.  The  greatest  need  of  the  industry 
to-day  is  the  adequate  recognition  of  the  dominating  factors  in  the 
natural-gas  problem,  which  are : 

1.  Mandatory  pooling  of  field  operations  coupled  with  an 

adequate  market  price. 

2.  Education  of  the  natural-gas  producers,  and  of  the  public, 

coupled  with  national  constructive  legislation." 

Other  more  specific  measures  advocated  by  Wyer-  include: 
Removal  of  all  gasoline  suspended  in  the  gas;  the  intensive  and 
extensive  use  of  compressors  in  order  to  extract  a  larger  percentage 
of  the  gas  from  the  ground ;  careful  measurement  of  the  gas  produced, 
in  the  field,  into  and  out  of  transmission  lines,  and  into  distributing 
plants,  in  order  to  have  a  constant  check  on  the  leakage;  attention 
to  the  disintegrating  action  of  stray  electric  currents,  upon  the  gas 
mains;  development  of  lower  distributing  pressures;  more  efficient 
utilization,  through  proper  adjustment  of  old  apphances  and  con- 
struction of  more  efficient  appliances;  and  the  placement  of  nat- 
ural gas  upon  a  price-level  adequate  to  insure  efficient  develop- 
ment, discourage  improper  industrial  consumption,  and  in  general 
render  this  product  worth  saving. 

The  steps  likely  to  be  taken  from  now  on  toward  insuring  a  fuller 
utilization  of  natural  gas  than  has  characterized  the  past  will  cany 
additional  interest  as  forecasting  the  measures  that  may  later  come 
to  be  applied  to  petroleum. 

Carbon  Black  from  Natural  Gas.^  Carbon  black  is  an  amorphous 
form  of  soft  carbon  made  by  the  incomplete  combustion  of  natural 
gas.  Fifty-two  million  pounds  were  produced  in  the  United  States 
in  1919,  having  an  average  value  of  7.3  cents  a  pound.  In  its  manu- 
facture, 50  billion  cubic  feet  of  natural  gas  was  used,  nearly  8  per  cent 
of  the  country's  entire  consumption  of  natural  gas  in  that  year,  and 
the  yield  was  approximately  1  pound  of  carbon  black  from  each 
M  cubic  feet  of  gas.     The  carbon  black  industry  establishes  itself 

'  U.  S.  National  Museum,  Bull.  102,  Pt.  7,  1918,  pp.  62-63. 

2  Present  and  Prospective  Supply  of  Natural  Gas  Available  in  Pennsylvania, 
1918,  pp.  68-69. 

3  See  E.  G.  Sievers,  Carbon  Black  Produced  from  Natural  Gas  in  the  United 
States  in  1919,  U.  S.  Geological  Survey,  May,  1921. 


GASOLINE   FROM    NATURAL  GAS 


207 


in  the  vicinity  of  cheap  natural  gas.     The  distribution  of  the  industry- 
is  shown  in  Table  97. 

Table  97. — Puoduction  uf  Cauuon  Black  in  tuk    United  States  in  1919, 

BY  States 

Data  from  U.  S.  Geological  Survey 


States 

No. 

of 

Plants 

Carbon  Black 
Produced 

Natural  Gas 
Consumed 

Millions 

of 
Pounds 

Average 
Price, 
Cents 

per 
Pound 

Millions 

of  M. 

Cubic  Feet 

Average 
Yield  per 

M. 
Cubic  Feet, 
in  Pounds 

West  Virginia 

23 

7 
2 
2 
2 

29.9 
14.0 
4.87 
2.92 
0.32 

7.8 
6.6 
4.7 
8.3 
15.0 

23  1       1       1   "^ 

Louisiana 

20.3 
4.31 
1.95 
0.23 

0.7 
1.1 
1.4 
1.3 

Wyoming,  Montana.  .  .  . 
Oklahoma,  Kentucky .  . . 
Pennsylvania 

Total 

36 

52.1 

7.3 

49.9 

1.04 

About  45  per  cent  of  the  output  is  used  in  the  rubber  industry 
as  a  tire  filler;  25  per  cent  is  employed  in  the  manufacture  of  printing 
ink  adapted  to  fast  press  work;  17  per  cent  is  exported;  and  10  per 
cent  is  used  in  making  stove  polish.  From  the  point  of  view  of 
conservation,  the  manufacture  of  carbon  black  is  a  constructive 
enterprise  only  where  the  gas,  already  under  production,  enjoys  no 
domestic  or  industrial  market.  Vast  quantities  of  natural  gas  have 
been  improperly  utilized  in  the  manufacture  of  this  product. 

Gasoline  from  Natural  Gas.^ — Natural  gas  consists  of  a  mechan- 
ical mixture  of  permanent  gases  and  condensable  vapors;  the  con- 
densable constituents  are  water  vapor  and  gasoline  vapor.  The 
gasoline  vapor  may  be  condensed  and  recovered  in  liquid  form,  and 
in  recent  years  natural  gas  has  become  a  substantial  source  of  com- 
mercial gasoline.  Natural  gas  from  gas-wells  is  leaner  in  gasoline 
vapor  than  the  gas  produced  from  oil-wells;  natural  gas  lean  in 
gasoline  vapor  is  termed  dry  gas,  while  a  product  richer  in  gasoline 
vapor  is  called  wet  gas.^  The  natural  gas  that  flows  from  oil-wells 
coming  out  l)etween  the  casing  and  the  tubing  is  fre(}uently  termed 

1  For  detailed  statistical  data  on  this  subject,  see  E.  G.  Sievers,  Natural-gas 
Gasoline  in  1919,  U.  S.  Geological  Survey,  1921. 

2  These  terms  have  reference  also  to  the  content  of  water  vapor. 


208 


NATURAL   GAS  AND   NATURAIv-ClAS   GASOLINE 


casing-head  gas,  and  the  gasohne  made  from  this  gas  is  called  casing- 
head  gasoline.  In  the  Mid-Continent  region,  the  industry  manu- 
facturing gasoline  from  natural  gas  is  spoken  of  as  the  casing-head 
gasoline  industry,  a  name  changed  by  the  trade  in  1921  to  the  nat- 
ural gasoline  industr3^ 

The  growth  in  output  of  natural-gas  gasoline  in  the  United  States 
has  been  notably  rapid,  as  shown  in  Fig.  100.  It  will  be  observed 
that  the  output  of  this  type  of  gasoline  is  rapidly  approaching  a  lim- 
iting factor,  the  total  quantity  of  natural  gas  consumed;  and  that 
the  yield  per  unit  of  natural  gas  treated  is  declining,  as  indicated  by 
the  crossing  of  curves  B  and  C  in  Fig.  100.  Statistical  data  showing 
the  growth  of  the  natural-gas  gasoline  industry  are  presented  in 
Table  98. 


Table  98. — Growth  of  the  Natxjral-gas  Gasoline  Industry  in  the  United 

States 

Data  from  U.  S.  Geological  Survey 


Year 

Gasoline 

Produced 

in 

United  States 

Millions  of 

Gallons 

Total 

Gasoline 

Produced 

from 

Natural  Gas, 

Millions  of 

Gallons 

Natural 

Gas 

Treated, 

Millions  of  M. 

Cubic  Feet 

Average 
Gasoline 
Yield  per 
M.  Cubic 
Feet  Gas, 
Gallons 

Number 

of 
Plants 

Daily 

Capacity 

of 

Plants, 

Thousands 

of  Gallons 

1911 
1912 

1913 
1914 

1915 
1916 
1917 
1918 
1919 

20.59 
2851 
3570 
3958 

7.43 

12.1 
24.1 

42.7 

65.3 
103 
218 
283 
352 

2.48 
4.68 

9.89 
16.9 

24.1 
209 
429 
449 
480 

3.00 
2.6 
2.43 
2.43 

2.57 

0.496 

0..508 

0.63 

0.74 

176 
250 
341 
386 

414 

596 

886 

1004 

1191 

37.1 
61.3 

152 

179 

232 

49.= 

902 

1022* 

*  Estimated. 


The  marked  increase  in  output  that  characterized  1916  should  not 
escape  attention.  This  sudden  expansion  came  as  a  result  of  the 
recovery  of  the  gasoline  market  from  the  depressing  effect  of  the 
Gushing  overproduction. 

Gasoline  is  recovered  from  natural  gas  chiefly  by  two  methods, 
the  compression  method  and  the  absorption  method.  Before  1916, 
the  output  was  obtained  almost  exclusively  by  the  compression 
method  from  wet  gas  flowing  from  oil  wells.  From  1916  on,  the 
absorption  method  has  come  into  growing  importance,  extending 
the  commercial  extraction  of  gasoline  to  the  so-called  dry  gas,  too 


GASOLINE  FROM   NATURAL  GAS 


209 


lean  in  gasoline  content  to  warrant  treatment  by  compression  meth- 
ods. The  relative  contributions  made  by  the  two  processes  for  the 
period  1916-1919  are  shown  in  Table  99. 


900 
800 

TOO 
600 
500 
400 

300 


lOO 
90 
80 
70 
60 

50 


CO.  fi 

■"iL 

o*;i 

'~~ 

""--. 

N,^ 

0.L  ga4     CW\ 

LUO^iS^ 

V. 

r-\^ 

M>PTlO 

M    OF 

iW^iS 

— — 

^■■ 

OTAL 

f' 

"^ 

1 

^ 

h 

/ 

1 

F 

\ 

4 

/f 

'/ 

5.   NAT 

URAL- 

3AS  G 

^S0LI^ 

-// 

PRqDUCE 
OF  pALLO 

3  (MIL 

-as)  — 

IONS 

// 

/ 

[■ 

y 

f 

/ 

VOLU 
TREA 
EXTF 

,GASC 

ME    0 
TED    F 
ACTIO 
LINE 
.  CU. 

GAS 
OR 
N    OF 

WILLI 

INS 

/ 

/ 

/ 

/ 

// 

/ 

// 

/ 

/ 

/ 

/ 

/ 

/ 

/ 

/ 

l+ioo;^ 

\^   80 


\\-  40 
J+  20 


1-  20 
30 
40 

-I-  50^ 


1907  1908  1909  1310  1911  1912  1913  1914  1915  1916  1917  1918  1919  1920  1921 
Fig.  100. — Trond  of  the  production  of  natural-gas  gasoline  in  the  United  States 
compared  with  consumption  of  natural  gas,  by  years,  1911-1919;   data  from 
U.  S.  Geological  Survey, 

In  1919  over  half  of  the  natural-gas  gasoline  was  produced  in 
Oklahoma;  West  Virginia,  California,  and  Pennsylvania  ranking 
next  in  order.  The  relative  importance  of  the  various  states  as 
contributors  during  the  period  1911-1918  is  shown  in  Fig.  101. 


210 


NATURAL   GAS   AND   NATURAL-GAS   GASOLINE 


Table  99. — Output  of  Natural-gas  Gasoline  in  the  United  States, 

1916-1919,  BY  Methods  of  Production 

Data  from  U.  S.  Geological  Survey 


By  Compression  * 

By  Absorption 

1 

Gasoline 

Gas 

Average 

Gasoline 

Gas 

Average 

\  ear 

No. 

Produced, 

Treated, 

Yield  per 

No. 

Produced, 

Treated, 

Yield  per 

of 

Millions 

Millions 

M.  Cubic 

of 

Millions 

Millions 

M.  Cubic 

Plants 

of 

of  M. 

Feet  Gas, 

Plants 

of 

of  M. 

Feet  Gas, 

Gallons 

Cubic  Feet 

Gallons 

Gallons 

Cubic  Feet 

Gallons 

1916 

550 

85 

36.7 

46 

18.6 

172 

1917 

784 

169 

79.5 

2.123 

102 

49.0 

350 

0.140 

1918 

865 

220 

99.9 

2.20 

139 

62.8 

349 

0.18 

1919 

1025 

261 

117.7 

2.21 

166 

90.4 

375 

0.24 

*  Includes  some  production  by  vacuum  pumps. 

The  average  price  per  gallon  for  natural-gas  gasoline  for  a  number 
of  selected  states  and  the  countiy  as  a  whole  is  given  in  Table  100. 

Table  100. — Average  Price  of  Natural-gas  Gasoline  in  the  United  States, 

1911-1919 

Data  from  U.  S.  Geological  Survey 

(In  cents  per  gallo7i) 


Year 

Oklahoma 

West  Virginia 

California 

Pennsylvania 

Whole  Country 

1911 

5.40 

7.18 

7.47 

7.16 

1912 

6.3 

9.6 

10.8 

10.6 

9.6 

1913 

8.94 

10.54 

10.87 

11.01 

10.22 

1914 

6.44 

7.45 

8.36 

7.79 

7.28 

1915 

7.46 

8.54 

7.60 

9.66 

7.88 

1916 

12 .  13 

16.12 

13.37 

17.77 

13.85 

1917 

18.71 

19.93 

15.40 

20.01 

18.45 

1918 

17.3 

19.9 

15.5 

20.6 

17.8 

1919 

17.1 

23.3 

14.2 

21.7 

18.2 

Natural-gas  gasoline  is  a  highly  volatile  product,  with  a  rela- 
tively low  initial  point  and  end-point.  It  vaporizes  too  readily  to 
be  used  in  its  raw  condition  and,  having  the  capacity  to  contribute 
to  less  volatile  petroleum  distillates  the  quahties  requisite  in  motor- 
fuel,  it  is  employed  for  blending  with  kerosene,  naphtha,  or  straight- 
run  gasoline  of  relatively  high  end-point.  This  product,  therefore, 
is  responsible  for  the  output  of  something  like  twice  the  quantity  of 
commercial  gasoline  represented  by  its  own  volume.  By  virtue  of 
its  low-boiling  constituents,  natural-gas  gasoline  contributes  volatile 


GASOLINE  FROM  NATURAL  GAS 


211 


components  that  permit  easier  starting  of  the  engine  and  give  greater 
operating  flexibihty  when  properly  blended.  In  times  of  strong 
demand,    however,    natural-gas    gasoline    is    frequently    emploj'ed 


PERCENTAGE   OF  OUTPUT 

20  40  60 


so 


WEST  VIRGINIA 
OHIO 

PENNSYLVANIA 
OKLAHOMA 

JlUlllllllJ  lUIIHIIIIIUIUII  4  Q 

<o 

J23 

"oazi^ 

20 

■  5 

OTHERS 

33 

WEST  VIRGINIA 
PENNSYLVANIA 
OHIO 
OKLAHOMA 

1144 

<c 

^^^17 

...:,i  .114 

■^13 

CALIFORNIA 

J9 

lU 

OTHERS 

D3 

WEST  VIRGINIA 

OKLAHOMA 

PENNSYLVANIA 

^mam^^'Ai 

'as^\^ 

CALIFORNIA 

■    114 

OHIO 

T~"|9 

w 

OTHERS 

33 

OKLAHOMA 
WEST  VIRGINIA 

[IIIIIIIIIIID2I 

40 

CALIFORNIA 
PENNSYLVANIA 

ll 

8 

« 

^n 

OHIO 

p6 

*» 

ILLINOIS 

S3 

OTHERS 

Qi 

OKLAHOMA 
CALIFORNIA 

^^^^^ 

1        ■ 

20 

WEST  VIRGINIA 
PENNSYLVANIA 

imiiiiiiiii 

7 

CO 

^9 

OHIO 

;33 

Ol 

ILLINOIS 

32 

OTHERS 

11 

OKLAHOMA 
WEST  VIRGINIA 

lllllllllllllS 

CALIFORNIA 

|17 

PENNSYLVANIA 

IS09 

© 

OHIO 

33 

a 

ILLINOIS 

|2 

LOUISIANA 

12 

OTHERS 

]2                                     1 

OKLAHOMA 
WEST  VIRGINIA 

Dmiiniis 

PENNSYLVANIA 

il3 

^6 

TEXAS 

33 

o 

OHIO 

D3 

VJ 

LOUISIANA 

|2 

ILLINOIS 

32               1                     ' 

OTHERS 

33 

WEST  VIRGINIA 

I1I111I1113 

^■^ 

^^- 

3U 

CALIFORNIA 

Ill 

PENNSYLVANIA 

^6 

_. 

TEXAS 

33 

(O 

LOUISIANA 

13 

CO 

OHIO 

]2 

ILLINOIS 

|2 

OTHERS 

]2 

Fig.   101. — Rank  of  states  producing  natural-gas  gasoline,   1911-1918,  in  per- 
centages of  each  year's  output;  after  E.  G.  Sievers,  U.  H.  Geological  Survey. 

blended  with  heavy  distillates  with  less  satisfactory  results.  The 
development  of  natural-gas  gasohne  has  encouraged  the  upward 
trend  in  the  end-point  of  commoi-cial  gasohne  and  hence  exerted  a 
far-reaching  effect  upon  the  supply  of  motor-fuel. 


CHAPTER   XV 
MARKETING  OF  PETROLEUM  PRODUCTS 

An  outstanding  characteristic  of  the  petroleum  industr>^  is  the 
high  degree  of  proficiency  attained  in  the  distribution  and  market- 
ing of  its  products.  The  crude  oil  is  carried  by  pipe-line  or  tank- 
steamer  to  refineries  in  proximity  to  demand,  whence  the  refined 
products  are  distributed  in  tank-cars  to  the  consuming  centers  and 
from  there  in  tank  wagons  to  the  points  of  consumption.  This  vast 
and  extensive  machinery  of  distribution  is  for  the  most  part  operated 
by  the  industry  itself  as  an  integral  part  of  its  manufacturing  activ- 
ities. 

The  petroleum  interests  have  paid  unremitting  attention  to  the 
means  for  extending  the  markets  for  petroleimi  products.  The 
incentive  for  this  attention  has  been  ever  present  in  the  form  of  a 
production  of  crude  oil  that  grew  more  rapidly  than  the  normal 
industrial  development  of  the  countiy.  A  lavish  supply  of  petro- 
leum was  continuously  forthcoming  under  the  impetus  of  the  highly 
competitive,  individualistic  methods  of  JDroduction  in  vogue,  and 
exerted  a  constant  pressure  in  the  direction  of  forcing  an  adequate 
outlet  for  the  products  involved.  In  consequence,  the  efforts  to 
adapt  this  raw  material  to  industrial  and  social  needs  came  to  be 
highly  organized,  wliile  the  production  of  the  raw  material  itself 
found  sufficient  stimulus  in  the  undirected  energy  of  the  wild- 
catter and  the  ready  productivity  of  the  resource.  To-day,  there- 
fore, we  find  the  marketing  of  oil,  with  its  preparatory  steps  of 
transportation  and  refining,  to  be  a  closely  integrated  enterprise, 
handling  tremendous  volumes  of  products,  through  diverging  and 
ramifying  channels  of  distribution  of  a  unique  and  singularly  effi- 
cient character. 

In  contrast  to  the  oil  industry,  which  has  thus  far  focussed  its 
main  efforts  upon  the  distribution  of  its  products,  with  efficiency 
in  production  under  neglect,  stands  the  automotive  industry.  This 
great  activity  came  upon  the  scene  with  a  large  potential  demand 
ready  to  be  filled;  the  problem  here  was  not  marketing,  but  pro- 
duction. In  consequence,  the  automotive  industry  developed  with 
ever}^  effort  bent  upon  quantity  production,  in  an  attempt  to  satu- 

212 


DEVELOPMENT  OF  OIL   MARKETING  213 

rate  the  demand  with  the  greatest  possible  dispatch;  the  matter  of 
placing  the  product  was  relatively  simple.  Accordingly^  the  auto- 
motive industr}'  stands  to-day  as  an  activity  whose  effectiveness  in 
production  is  carried  to  a  high  degree  of  attainment,  with  market- 
ing a  wholly  subordinate  issue;  while  the  oil  industry  enjoys  an 
effectiveness  in  marketing  that  is  scarcely'  to  be  found  elsewhere 
in  the  entire  industrial  field  with  production  disorganized  and 
wasteful. 

The  contrast  is  significant.  The  automotive  void  is  rapidly 
becoming  filled;  while  the  demands  for  the  products  of  petroleum 
have  been  encouraged  to  an  insistence  that  cannot  continue  to  be  fully 
met  from  the  resources  in  sight.  The  relative  focus  of  the  two  indus- 
tries may  soon  be  expected  to  change.  The  automotive  industiy, 
with  little  further  advance  possil)lo  in  production  efficiency,  wdll  turn 
its  attention  to  marketing  its  product  against  a  gathering  sales 
resistance;  while  the  oil  industrv^  from  now  on  will  find  its  chief 
problem  in  gaining  efficiency  in  production  in  order  to  more  ade- 
quately meet  the  demands  which  will  mount  apace  without  direct 
attention. 

Development  of  Oil-marketing. — In  order  to  gain  a  proper  per- 
spective of  the  developments  in  the  marketing  of  mineral  oils,  it  is 
necessarj^  to  review  briefly  the  recent  history  of  the  industry.  We 
have  already  noted  that  the  production  of  crude  petroleum  has  grown 
mainly  on  the  basis  of  individual  enterprise  in  the  drilhng  and 
operation  of  wells  under  highty  competitive  conditions,  while  the 
activities  having  to  do  with  transportation,  refining  and  marketing 
have  tended  toward  integration  under  the  direction  of  large-unit, 
corporate  enterprise. 

At  the  end  of  the  first  decade  of  the  present  century,  a  minor  part 
of  the  output  of  petroleum  products  came  from  a  large  number  of 
independent  companies,  and  the  remainder  from  the  Standard  Oil 
Company  of  New  Jersey,  which  operated  throughout  the  United 
States  as  a  single  unit  and  under  the  supervision  of  one  executive.^ 
The  marketing  of  petroleum  products  was  then  carried  on  by  the 
Standard  Oil  Company,  In'  the  Independent  Companies  affiliated 
with  refining,  and  by  oil  jobbers  who  bought  directly  from  the  inde- 
pendent refiners. 

In  1911,  after  long  and  sensational  litigation,  the  Standard  Oil 
Company  of  New  Jersey  w^as  dissolved  by  judgment  of  the  Supreme 
Court,  and  the  original  organization  broken  up  into  thirty-three 

*  For  a  detailed  discussion  of  marketing  practices,  consult  A.  G.  McGuire, 
Prices  and  Marketing  Practices  Covering  the  Distribution  of  Gasoline  and 
Kerosene  throughout  the  United  States,  U.  S.  Fuel  Administration,  1919. 


214  MARKETING    OF    PETROLEUM    PRODUCTS 

separate  and  independent  units,  occupying  territories  with  geographic 
rather  than  commercial  boundaries  and  requiring  for  each  unit  a 
separate  and  independent  aihninistration. 

The  result  of  the  dissolution  decree  upon  the  marketing  of  petro- 
leum products  is  described  as  follows  by  the  U.  S.  Fuel  Administra- 
tion : 

One  of  the  immediate  and  permanent  results  of  the  application  of 
this  principle  was  to  limit  the  interest  of  the  executives  of  the  new 
commercial  entities  to  market  values  in  the  territory  in  which  they 
operated.  The  factor  which  had  worked  to  exert  national  rather 
than  sectional  influence  upon  the  trend  of  the  markets  and  to  estab- 
lish a  general  level  of  prices  for  petroleum  products,  subject  only  to 
transportation  and  similar  normal  variations,  had  been  wiped  out  of 
existence.  The  fragments  which  had  formerly  constituted  the  Stand- 
ard Oil  Co.  (New  Jersey)  were  then  found,  in  their  new  corporate  form, 
to  be  unable  separately  to  perform  the  service  to  the  public  which 
had  been  accomplished  by  the  complete  organization.  Many  of  the 
units  were  without  the  equipment  both  to  manufacture  and  distrib- 
ute petroleum  products  in  the  territory  in  which  they  operated  at 
the  time  of  tlie  court  decree.  Some  of  them,  formerly  merely 
marketing  subsidiaries  of  the  original  corporation,  were  now  faced 
with  the  necessity  of  finding  new  sources  of  supply.  The  corollary 
to  this  was  that  those  units  which  in  the  general  scheme  had  been 
devoted  principally  to  the  refining  of  oil  found  that  new  markets  for 
their  output  were  the  first  essential  to  their  existence. 

It  is  no  reflection  upon  the  high  purpose  and  public  zeal  which 
brought  about  the  attempt  at  Government  control  to  say  that  experi- 
ence has  shown  that  action  to  be  an  economic  mistake  and  that  the 
new  order  which  it  established  accentuated  rather  than  retarded  the 
conditions  which  it  was  designed  to  correct.  This  development  has 
not  been  the  outcome  of  lax  or  unintelligent  enforcement  of  the  dis- 
solution order,  for  the  weight  of  evidence  accumulated  as  the  result 
of  keen  and  almost  constant  surveillance  by  several  departments  of 
the  Government  is  entirely  in  support  of  the  conclusion  that  the  dis- 
solution decree  has  l^een  scrupulously  observed. 

The  separate  units  do  not  compete,  but,  in  general,  limit  their 
activities  to  the  territory  in  which  they  were  operating  at  the  time  of 
the  decree  in  the  Standard  Oil  case.  The  active  competition  of  two 
or  more  of  them  for  business  in  the  same  territory  would  have  much 
the  same  effect  on  outside  competitors  as  a  combination  between 
them  to  suppress  competition,  and  might  well  create  the  suspicion 
that  this  was  the  purpose.  By  not  invading  each  other's  territory 
they  perhaps  follow  the  only  practical  course  to  avoid  charges  of 
collusion  and  of  attempts  to  evade  the  decree  in  the  dissolution  suit. 
These  units  trade  with  each  other  in  conformity  with  the  law,  but 
after  eight  years  the  dissolution  decree  has  been  found  neither  to 
have  destroyed  nor  lessened  the  influence  of  the  so-called  Standard 
Oil  companies  in  their  respective  territory.  It  has  simph^  proved 
that  legislation  can  not  change  the  operation  of  economic  laws. 

The  admitted  efficiency  which  characterized  the  original  corpora- 


MARKETING  OF  GASOLINE  215 

tion  was  not  removed  by  the  dissolution  decree  and  is  still  in  evidence 
in  the  detached  organizations.  The  advantage  of  large  cash  reserves, 
the  possession  of  strategic  commercial  locations,  the  experience 
gained  from  acquaintance  with  the  industry  virtually  since  its  incep- 
tion, have  all  contributed  to  maintain  the  position  of  this  particular 
group  and  to  continue  its  influence  upon  markets  and  prices.  After 
eight  years  of  operation  under  the  dissolution  decree,  the  premier 
position  and  influence  of  the  Standard  Oil  group  remains  unques- 
tioned. The  present  situation  conclusively  demonstrates  that  legis- 
lation can  not  change  the  working  out  of  fundamental  economic 
principles. 

Marketing  of  Gasoline. — Gasoline  is  marketed  by  the  so-called 
Standard  Companies,  bj^  the  Independents,  and  by  jobbers.^ 
Roughly  two-thirds  of  the  gasoline  distributed  in  the  United  States 
is  marketed  by  the  Standard  Companies  which  purchase  part  of  this 
quantity  from  the  independent  refiners,  since  the  former  group 
refines  only  about  one-half  of  the  oil  run  to  stills  in  this  country. 

The  Standard  group  has  developed  a  highly  perfected  system  of 
distribution  involving  the  direct  placement  of  the  product  in  the 
hands  of  the  consumer  through  the  medium  of  service  stations, 
tank-wagon  delivery,  and  tank-stations  in  sparsely  settled  districts. 
Every  step  in  the  movement  of  the  product  from  the  refinery  to 
the  ultimate  consumer  has  been  worked  out  with  the  utmost  regard 
to  economy  and  efficiency,  and  the  distribution  of  gasoline  stands 
almost  without  a  rival  in  the  commercial  field. 

The  large  independent  refineries  market  much  of  their  gasoline 
through  service  stations  and  tank-wagon  delivery;  but,  as  the  de- 
velopment of  the  requisite  marketing  organization  and  equipment 
is  a  large-scale  enterprise  demanding  extensive  investment,  the  smaller 
independents,  as  well  as  the  larger  ones  in  part,  sell  their  product  to 
the  Standard  Companies,  and  to  jobbing  organizations  operating 
independently  in  localized  territories.  The  jobber,  indeed,  is  some- 
what complementary  to  the  small  skimming  plant;  and  hence  job- 
bing is  most  active  in  the  Middle  West,  where  the  products  of  the 
small  refinery  are  available  in  greatest  abundance. 

Before  the  Standard  Oil  combination  was  dissolved  in  1911,  the 
whole  area  of  the  United  States  was  divided  among  its  eleven  mar- 
keting companies,  and  each  one  operated  almost  exclusively  in  its 
assigned  field.  After  the  dissolution,  the  existing  marketing  arrange- 
ments by  which  there  was  this  division  of  territory  remained  undis- 
turbed,  and  accordingly  the  various    Standard   companies  to-day 

1  It  is  common  pract i('o  in  the  trade  to  designate  the  companies  formerly 
combined  in  the  Standard  Oil  Company  of  New  Jersey  as  the  Standard  group, 
and  all  other  companies  as  the  Independents. 


216  MARIvETING    OF    PETROLEUM    PRODUCTS 

operate  separately  in  the  original  territories  without  substantial 
change.  The  location  and  extent  of  these  marketing  territories  are 
shown  in  Fig.  102.  The  Standard  companies  take  the  lead  in  deter- 
mining the  sale  price  of  gasoline  by  announcing  the  price  at  which 
this  product  may  be  purchased  from  the  tank-wagon.  The  retail 
price  at  service  stations  is  usually  2  cents  higher  than  the  tank-wagon 
price.  The  other  marketing  companies  and  the  jobbers  in  any 
given  territory  usually  adjust  their  prices  in  accordance  with  the 
tank-wagon  price  as  determined  by  the  Standard  companies.  The 
tank-wagon  price,  in  turn,  tends  to  fluctuate  in  sympathy  with  the 
price  of  crude  petroleum  and  with  the  price  of  the  products  made 
jointly  with  gasoline  from  this  raw  material.  "  Price  initiative  to-day 
seems  to  be  left  generally  to  the  Standard  companies  and  competition 
is  apparently  more  directed  to  developing  facilities  for  getting  busi- 
ness than  to  seeking  to  obtain  it  by  underselling."^ 

Occasionally,  where  there  is  an  abundant  supply  of  gasoline,  the 
independent  marketers  and  jobbers  in  a  given  locality  may  begin 
to  sell  under  the  prevailing  tank-wagon  price.  Usually,  in  such 
instances,  a  price-cutting  war  develops,  and  the  price  of  gasoline 
is  forced  down  below  a  profitable  level.  Of  late  years,  the  jobbing 
interests  have  sought  to  avoid  the  precipitation  of  this  type  of  cut- 
throat competition,  but  a  revival  in  the  tendency  was  apparent  in 
1921. 

Mainly  as  a  result  of  the  dissolution  of  the  original  Standard  Oil 
Company  into  separate  activities,  occupying  distinctive  and  non- 
overlapping  territories,  the  gasoline  market  has  in  some  degree 
become  sectionalized,  with  minor  divergences  and  inconsistencies 
in  marketing  practices  and  price  from  locality  to  locality.  It  thus 
comes  about  that  two  adjacent  points  on  opposite  sides  of  a  state 
line  may  see  a  difference  of  as  much  as  2  or  more  cents  in  the  price 
of  gasohne.  For  example  on  January  1,  1921,  the  tank-wagon 
price  of  gasoline  in  New  York,  served  by  the  Standard  Oil  Company 
of  New  York,  was  31  cents;  whereas  the  tank-wagon  price  of  gaso- 
line in  Newark,  N.  J.,  served  by  the  Standard  Oil  Company  of  New 
Jersey  was  28.5  cents  a  gallon.  This  sort  of  divergence  in  price 
has  given  rise  to  much  misunderstanding  and  criticism,  but  could 
scarcely  be  altogether  avoided  under  the  circumstances  surrounding 
the  marketing  of  this  product  without  an  undue  duplication  of 
marketing  agencies. 

The  division  of  territory  amongst  the  companies  of  the  Standard 
group  has  also  given  rise  to  divergencies  in  marketing  practice  in  dif- 

1  The  Advance  in  Price  of  Petroleum  Products,  Federal  Trade  Commission, 
Washington,  1920,  p.  53. 


MARKETING   OF   GASOLINE 


217 


218 


MARKETING    OF    PETROLEUM    PRODUCTS 


Table  101.— Marketing  Practice  of  the  Standard  Oil  Companies  in 
Various  States  in  1918 


(After  A.  G.  Maguire,  U.  S.  Fuel  Administration) 


Name  of  Standard 
Oil  Co. 

Operating  in — - 

Retail 
Service 
Stations 

Price 

Remarks 

Standard  Oil  Co 

of 

New  York,  Connec- 

None.. . 

Single 

New  York 

ticut,     Massachu- 
setts,   Vermont, 
New  Hampshire, 
Rhode  Island,  and 
Maine 

Atlantic  Refining 

Co. 

Pennsylvania    and 

Many .  . 

10  per  cent  off  retail 

Also  10  per  cent  off 

Delaware 

for  resale 

retail  for  large 
consumers  taking 
direct  from  tank- 
wagon 

Standard      Oil 

Co. 

Maryland,  Virginia, 

None. . . 

Wholesale  price  for 

(New  Jersey) 

West    Virginia, 
District  of  Cclum- 
bia.    North    Caro- 
lina,    and     South 
Carolina 

resale    1    cent    per 
gallon  extra  to  the 
consumer 

Do 

New  Jersey 

..do.... 

Single 

One  pi  ice  in  New 
Jersey  on  account 

of  State  law 

Standard  Oil  Co 
Ohio 

of 

Ohio 

Great 
many 

Resale  1  cent  under 
retail  price.  Other- 

wise    retail     price 

applies 

Standard  Oil  Co 

of 

Kentucky,      Missis- 

Few  

General  tank-wagon 

Service      stations 

Kentucky 

sippi,    Alabama, 

price  2  cents  off  for 

sell     gasoline     at 

Florida,   and 

resale 

tank-wagon  price 

Georgia 

Standard   Oil  Co 

of 

Louisiana,      Arkan- 

Many.  . 

Single 

Louisiana 

sas,  and  Tennessee 

Magnolia  Petroleum 

Texas,      Oklahoma, 

..do.... 

Resale  2  cents  under 

Co. 

and  Arkansas 

tank-wagon  price 

Standard  Oil  Co 

of 

Illinois,    Indiana, 

Great 

Single 

Indiana 

Michigan,  Wiscon- 
sin, Missouri,  Iowa, 
Minnesota,    North 
Dakota,  South  Da- 
kota,   Kansas   and 
few      stations      in 
Oklahoma 

number 

Standard  Oil  Co. 

of 

Nebraska 

Few 

....do 

Nebraska 

Continental  Oil  Co. .  |  Colorado,     Utah, 

..do.... 

Wholesale  except  at 

New     Mexico, 

service    stations 

Wyoming,       Mon- 

where 2  cents  extra 

tana,  and  Idaho 

charged 

Standard   Oil  Co. 

of  California,   Arizona, 

Many.  . 

2  cents  less  when  for 

California 

Nevada,      Oregon, 
and  Washington 

resale 

MARKETING  OF   KEROSENE  219 

ferent  parts  of  the  country,  as  shown  in  Table  101,  reflecting  the 
conditions  prevailing  in  1918,  which  have  not  changed  substantially 
since  that  time. 

Marketing  of  Kerosene. — Kerosene  is  marketed  in  much  the 
same  manner  as  gasohne;  only  the  service  station  is  unimportant, 
and  the  major  part  is  distributed  to  the  consumer  through  the  agency 
of  the  tank-wagon  and  tank-station;  considerable  use  is  also  made 
of  the  retail  store.  The  price  of  kerosene  is  usually  determined  in 
the  same  manner  as  the  price  of  gasoline;  the  tank-wagon  price 
charged  by  the  Standard  companies  being  followed  by  the  other 
marketers.  There  is  a  systematic  differential  between  the  price  of 
the  two  products,  and  the  two  prices  tend  to  fluctuate  in  unison. 
Of  recent  years,  however,  the  differential  has  been  narrowing  since 
the  price  of  kerosene  has  advanced  the  more  rapidly  of  the  two. 

The  export  trade  in  kerosene  is  large  and  the  marketing  of  kero- 
sene abroad  has  received  careful  attention.  To-day  American  kero- 
sene reaches  literally  to  the  four  corners  of  the  globe,  since  markets 
nearer  at  hand  were  inadequate  to  afford  outlet  to  the  supply  of 
this  commodity.  The  five-gallon  kerosene  can  is  a  familiar  object 
in  the  most  out-of-the-way  regions. 

Marketing  of  Fuel  Oil. — The  distribution  of  fuel  oil  is  entirely 
different  from  that  of  gasoline  or  kerosene.  Consumed  in  bulk  by 
industrial  establishments,  railroads,  and  steamships,  its  placement 
does  not  require  the  attenuated  distribution  demanded  by  gasoline 
and  kerosene.  It  is  sold  for  the  most  part  under  direct  consignment 
from  the  refuiery  to  the  consumer  and  much  of  the  supply  is  con- 
tracted for  in  advance.  Its  market  price  in  the  past  has  tended  to 
fluctuate  widely  under  varying  conditions  of  supply  and  demand, 
especially  as  a  result  of  the  tendency  of  crude  petroleum  to  display  a 
periodic  acceleration  in  advance  of  demand,  and  consequently  the 
need  for  anticipating  conditions  has  been  particularly  important  in 
order  to  secure  advantageous  disposition. 

The  storage  capacity  demanded  by  fuel  oil  has  rendered  the 
matter  of  marketing  especially  difficult  for  the  small  refiner,  who 
must  keep  this  product  continuously  on  the  move  to  make  room 
for  the  new  output.  In  consequence,  the  small  refiner  is  unable  to 
maneuver  with  the  purpose  of  taking  advantage  of  market  condi- 
tions. On  the  contrary,  it  frequenth'  happens  that  an  appearance 
of  oversupply  is  created  entirely  fortuitously  by  a  coincidence  of 
accumulating  storage  in  adjacent  refineries,  to  the  entire  demoraliza- 
tion of  the  local  maiket . 

Marketing  of  Lubricating  Oils. — Lubricants  present  a  third  type 
of  problem  in  marketing.     These  products  are  highly  fabricated  into 


220  MARKETING    OF    PETROLEUM    PRODUCTS 

a  diversity  of  types  to  meet  a  wide  range  of  specialized  demands. 
They  are  not  bulk  products  in  the  sense  that  gasoline  or  fuel  oil  are, 
but  require  individual  treatment  in  their  placement  into  use. 

The  motor-oils,  which  now  constitute  a  substantial  portion  of 
the  entire  output  of  lubricants,  are  in  part  handled  like  gasoline 
through  service  stations  and  by  tank-wagons  to  garages  and 
stores. 

Lubricating  oils  designed  for  industrial  service  are  usually  sold 
directly  on  contract  to  the  industrial  establishments.  The  selling  of 
such  oils  customarily  involves  an  engineering  sei'\'ice  to  fit  the  oil  to 
the  functions  it  is  designed  to  perform.  Lubricating  sales  are  conse- 
quently often  handled  by  an  engineering,  or  semi-engineering,  staff; 
some  companies  employ  lubricating  engineers  who  work  in  conjunc- 
tion with  the  salesmen, 

A  considerable  volume  of  lubricating  oils  is  handled  by  jobbing 
interests,  some  of  whom  buy  the  base  oils  and  compound  them  into 
special  grades  bearing  the  jobber's  name.  This  tendency,  together 
with  the  competition  prevailing  amongst  the  refiners,  has  resulted 
in  a  confusing  multiplicity  of  brands  and  an  extensive  range  of  adver- 
tising and  other  specialized  sales  effort. 

Inspection  Laws. — In  the  early  days  of  oil-marketing,  the  various 
states  passed  oil  inspection  laws  with  direct  reference  to  the  flash 
point  of  kerosene,  in  order  to  safeguard  the  users  of  this  product  from 
explosions.  Ver^^  little  attention  was  devoted  to  gasoline  beyond  a 
requirement  that  it  should  be  retailed  in  marked  containers  and 
labeled  "  dangerous."  With  the  growth  of  automotive  transporta- 
tion, however,  the  conditions  of  a  few  years  ago  have  been  reversed 
and  there  is  no  tendency  for  any  gasoline  to  be  left  in  the  kerosene 
to  lower  its  flash  point;  hence  the  basis  of  the  kerosene  inspection 
laws  is  obsolete. 

A  number  of  states  and  a  few  cities  have  tried  to  regulate  the  qual- 
ity of  gasoline,  but  most  of  such  requirements  are  unreasonable  and 
unscientific,  and  their  enforcement  would  materially  reduce  the  out- 
put of  gasoline.  "Most  of  the  laws  have  obviously  been  drafted  by 
people  lacking  even  an  elementary  knowledge  of  the  methods  of 
producing  and  analyzing  gasohne."  The  U.  S.  Fuel  Administration 
made  a  canvass  of  the  state  regulations  and  found  them  to  be  wholly 
impracticable  and  in  some  instances  ridiculous.  Since  then  a  Federal 
committee  on  the  standardization  of  petroleum  has  worked  on  the 
matter  and  with  the  Bureau  of  Mines  has  succeeded  in  bringing 
some  degree  of  consistencj'  into  the  situation.  Unscientific  and 
obsolete  requirements  have  proved  a  troublesome  and  costly  handi- 
cap to  the  marketing  of  petroleum  products. 


MARKET  ANALYSIS  221 

Market  Analysis. — Of  recent  years,  many  of  the  marketing  com- 
panies have  devoted  considerable  attention  to  the  measurement  of 
the  size  and  geographic  disposition  of  the  various  demands  for 
petroleum  products,  in  order  to  eliminate  waste  effort  in  distribution 
and  salesmanship.  Service  stations  are  usually  located  on  the  basis 
of  a  count  of  automobiles  that  pass.  The  expansion  of  marketing 
equipment  has  proceeded,  in  part,  upon  the  exact  measurement  of 
the  consumptive  requirements  of  the  territory  to  be  served.  And 
wide  use  has  been  made  of  the  registration  figures  for  automobiles 
and  trucks,  in  order  to  determine  the  rapidly  expanding  requirements 
for  gasoline  and  motor-oil.  A  well-advised  marketing  company 
should  know  the  exact  distribution  of  automotive  equipment  and 
manufacturing  activity  in  its  area  of  operations. 


CHAPTER  XVI 


ANALYSIS  OF  THE  EXPORTS  OF  PETROLEUM  PRODUCTS 


\'^m^-^!r. 


BREADSTUFFS 


MINERAL   OILS 

MEAT   &    DAIRY 
PRODUCTS 


Introduction. — Exports  of  mineral  oils  from  the  United  States 
constitute  one  of  the  leading  commodity  classes  entering  into 
foreign  trade  and  represent  an  important  fraction  of  the  petroleum 
products  refined  in  this  country.  In  1920  the  value  of  the  exports 
of  mineral  oils  was  6.8  per  cent  of  the  total  value  of  all  exports,  while 

in  1919  the  proportion  was  4.4  per  cent 
and  in  1918,  5.7  per  cent.  The  only 
groups  of  commodities  that  bulked 
larger  in  the  1920  export  returns  were 
cotton  and  breadstuffs,  each  represent- 
ing about  twice  the  value  of  the  mineral 
oils  sent  abroad.     (See  Fig.  103.) 

Exports  of  mineral  oils  are  confined 
largely    to    the    four    major  petroleum 
products — gasoline,    kerosene,    fuel  oil, 
and  lubricating  oils — the  relative  volume 
of  crude  petroleum  exported  being  small. 
Thus,  of  the  total  mineral  oils  shipped 
abroad  in  1920,  only  10.9  per  cent  in 
quantity  and    5.3    per    cent   in   value 
represented    crude    petroleum.      C(  m- 
pared  with  domestic  production,  exp«>rts 
of  crude  petroleum  in   1920  iimouLted 
to  1.8  per  cent,  while  exports  of  petro- 
leum products  represented  16.1  f'^^  ^^ nt. 
Fk;.  103.— Value  of  the  exports         Ratio  of  Exports  to Domesticl^^'o^^ic- 
of  mineral  oils  compared  with  tion. — The  American  petroleum  in^^^^lry 
other  exports  from  the  United  ^^^^^^  ^^^^  ^  nearly  20  per  cent  g^^^^Ger 
States  in  1920.  ,  .         ^     :  ,      ^      thi 

volume    oi    petroleum    products      .  m 

is  neoessaiT  to  meet  domestic  rec    ^e- 

ort 
ments,  the  surplus  being  sold  abroad  under  the  heading  of  exp^j»;^. 

Fig.  104  shows  in  graphic  form  the  proportions  of  the  domestic  ou  t^'.t 

of  gasoline,  kerosene,  fuel  oil,  and  lubricating  oils  which  went  r^l~' 

foreign  trade  in  1920.     It  will  be  observed  at  once  that  the  prop-i  - 

222 


ALL   OTHERS 


FIGURES    ARE    MILLIONS    OF    DOLLARS 


THE  FUNCTION  OF  EXPORTS 


223 


tions  of  kerosene  and  lubricating  oils  exported  are  much  higher  than 
the  proportions  of  gasoline  and  fuel  oil. 

The  ratio  of  exports  to  domestic  production  over  the  past  few 
years  for  the  leading  petroleum  products  is  shown  in  the  table  follow- 
ing: 

Table   102. — Ratio  of  Exports  to  Domestic  Productiox  for  the  Leading 
Petroleum  Products,  1914-1920 


Year 

Gasoline  and 
Naphtha, 
Per  Cent 

Kerosene, 
Per  Cent 

Fuel  Oil, 
Per  Cent 

Lubricating  Oils, 
Per  Cent 

1914 
1916 
1917 

1918 
1919 
1920 

14.0 
17.4 

14.6 

15.6 

9.4 

13.0 

52.1 

58.8 
38.1 

26.9 
41.7 
37.2 

18.8 

20.6 
17.3 

16.4 
S.l 
9.6 

37.2 

41.8 
37.2 

30.6 
32.5 
39.2 

I  EXPORTED         |.::.-:.-1UNEXP0RTED 


637 


GASOLINE   & 
NAPHTHA 


KEROSENE 


LUBRICATING 
OILS 


-     .         .   1     I     I         r  ^ 

lO    '20    30    40    50   60    70    80    90  ldO<< 
FIGURES   IN    RECTANGLES   ARE    MILLIONS 
OF   GALLONS 

Fig.  104. — Relation  of  the  volume  of  the  lead- 
ing petroleum  products  exported  to  the 
quantity  produced  in  the  United  States,  in 
1920. 


Table  102  indicates  the 
extent  to  which  foreign 
markets  are  essential  to  give 
an  adequate  outlet  to  the 
leading  petroleum  products 
produced,  especially  kero- 
sene and  lubricants.  Ex- 
ports of  gasoline  relative 
to  production  were  fairly 
steady  over  the  past  few 
3^ears,  whereas  the  ratio  for 
fuel  oil  showed  a  declining 
tendency,  while  the  ratios 
for  kerosene  and  lubricants 
displayed  a  marked  decline 
during  the  war  years  of 
1916-18  with  an  advancing 
tendencA'  thereafter. 

The  Function  of  Exports. 
— The  purpose  of  exports 
from  a  trade  standpoint  is 
to  give  outlet  to  surplus 
domestic  production,  thus 
maintaining  sufficient  taut- 


224     ANALYSIS  OF  THE  EXPORTS  OF  PETROLEUM  PRODUCTS 


ness  between  supply  and  demand  to  sustain  prices.  In  normal  times, 
also,  an  industry  enjoying  a  large  export  trade  is  more  stable  than 
one  more  dependent  upon  domestic  markets,  as  the  business  cj^cles  in 
different  countries  do  not  coincide,  and  the  composite  demand  is 
more  nearly  equalized.  A  secondary'  purpose  is  the  placement  of 
products  in  a  more  profitable  market  than  is  afforded  at  home. 

There  is  a  more  fundamental  function  of  an  economic  character, 
especially  true  of  the  oil  industry,  in  the  part  played  by  exports  in 
sustaining  a  more  nearly  balanced  outlet  for  joint-products  and 


SCALE  OF 

INCREASE  OR 

DECREASE 


1911     1912    1913   1914    1915    1916    1917    1918    1919    1920     1921 


Fig.  105. — Exjaorts  of  petroleum  products  from  the  United  States  by  years 

1910-1920. 

in  stimulating  the  commercial  flow  of  products  ahead  of  the  pro- 
duction of  crude  petroleum.  For  example,  the  output  of  crude 
petroleum  has  mounted  so  rapidly,  under  a  stimulus  arising  only  in 
part  from  demand,  that  domestic  markets  for  refined  products  were 
unable  to  keep  pace;  thus  the  vigorous  construction  of  foreign  mar- 
kets became  an  economic  necessity,  as  exemplified  in  the  efforts  that 
have  gone  into  sending  kerosene  to  the  four  corners  of  the  globe.  Of 
recent  years,  also,  when  the  domestic  demand  for  gasoline  has  been 
increasting  more  rapidly  than  the  demands  for  the  joint-products  of 
gasoline,  a  foreign  outlet  for  kerosene,  fuel  oil,  and  lubricants  has 
tended   to   better  proportionate   a   demand   thrown  badly   out   of 


GROWTH  OF  EXPORTS 


225 


balance  by  the  phenomenal  rise  of  automotive  transportation  in  this 
country. 

Growth  of  Exports. — The  trend  of  exports  for  the  principal  petro- 
leum products  over  the  past  decade  is  presented  in  Fig.  105.  It  is 
there  seen  that  up  to  1918  the  volume  of  fuel  oil  and  gasoline  exported 
was  increasing  sharply,  while  the  shipments  abroad  of  lubricating 
oils  were  growing  at  a  slower  ratio,  with  exports  of  kerosene  declining. 
The  effect  of  the  war  was  strongly  pronounced  only  for  kerosene, 
which  suffered  because  of  the  difficulty  of  access  to  far  eastern 
markets.  The  termination  of  the  war,  however,  reversed  the  situa- 
tion, sharply  curtailing  in  1919  the  exports  of  gasoline  and  fuel  oil, 
at  the  same  time  sending  the  exports  of  kerosene  upward  toward 
a  pre-war  normal.  This  sharp  reversal  of  export  conditions  in  1919 
had  a  marked  effect  upon  the  domestic  situation,  contributing  to  the 
laxity  of  the  gasoline  and  fuel  oil  market  and  to  the  strength  of  the 
kerosene  market.  In  1920,  in  spite  of  the  continuation  of  unstable 
conditions  abroad,  the  foreign  shipments  of  gasoline,  fuel  oil,  and 
lubricants  showed  notable  increases  over  1919,  kerosene  only  falling 
away  in  some  measure. 

The  volume  of  refined  oils  exported  from  1910-1920  is  given  in 
Table  103. 

Table  103. — Exports  of  the  Prixcipal  Petroleum  Products  from  the 

United  States  by  Years,    1910-1920 

{In  millions  of  gallons) 


Year 

Gasoline  and 
Naphtha 

Kerosene 

Fuel  Oil 

Lubricating  Oils 

1 
1 

1910 

101 

940 

118 

164 

1911 

137 

1112 

134 

183 

1912 

186 

1026 

266 

216 

1913 

188 

1119 

427 

208 

1914 

210 

1010 

704 

192 

1915 

282 

837 

812 

240 

1916 

356 

855 

964 

261 

1917 

416 

658 

1125 

280 

1918 

559 

491 

1201 

257 

1919 

372 

979 

618 

275 

1920 

635 

862 

847 

411 

Value  of  Exports. — The  value  of  the  principal  petroleum  products 
exported  from  the  United  States  from  1910-1920  is  shown  in  Talkie 
104.     A  graphic  comparison  of  the  value  of  these  exports  in  1913, 


226     ANALYSIS  OF  THE  EXPORTS  OF  PETROLEUM  PRODUCTS 


1919,  and  1920  is  given  in  Fig.  106,  which  emphasizes  the  notable 
increase  over  the  period  under  view,  the  value  of  refined  oil  exports 

549 


FIGURES   ARE   MILLIONS   OF   DOLLARS         / 


1913 


GASOLINE  &   NAPHTHA 


KEROSENE 


LUBRICATING  OILS. 


CRUDE    PETROLEUM 


1919 


1920 


Fig.  106. — Value  of  petroleum  products  exported  from  the  United  States  in  1913, 

1919,  and  1920. 

roughly  doubling  the  1913  figures  in  1918,  and  trebling  the  1913  record 
in  1920.     Fig.  106  also  brings  out  the  marked  advance  in  the  value 


COMPARISON   OP   EXPORT   AND   DOMESTIC    PRICES      227 


of  the  lubricating  oils  exported  in  1920,  as  compared  with  1919  as  well 
as  relative  to  the  increases  registered  for  the  other  petroleum  products. 

Table  104. — Value  of  the  Principal  Petroleum  Products  Exported  from 

THE  United  States  by  Years,  1910-1920 

(In  millions  of  dollars) 


Year 

Gasoline  and 
Naphtha 

Kerosene 

Fuel  Oil 

Lubricating  Oils 

1910 

8.41 

55.6 

3.73 

20.9 

1911 

11.5 

61.1 

3.88 

23.3 

1912 

20.5 

62.1 

6.60 

28.3 

1913 

28.1 

72.0 

11.1 

29.6 

1914 

25.3 

64.1 

19.2 

26.3 

1915 

33.9 

50.0 

22.5 

32.5 

1916 

68.7 

55.9 

27.1 

43.0 

1917 

93.1 

49.0 

45.7 

57.6 

1918 

140 

50.4 

66.6 

75.6 

1919 

92.0 

119 

32.6 

85.1 

1920 

175 

132 

55.9 

157 

Comparison  of  Export  and  Domestic  Prices. — The  prices  realized 
on  the  petroleum  products  exported  may  be  determined  by  dividing 
the  value  of  exports  by  the  gallonage.      A  comparison  of  the  average 

Table  105.— Comparison  of  Average  Export  Prices  with  Domestic  Prices 
FOR  THE  Principal  Petroleum  Products  by  Years,  1913-1920 


Year 

Gasoline  and 
Naphtha 

Kerosene 

Fuel  Oil 

Lubricating  Oils 

Average 

Average 

Average 

Average 

Average 

.\verage 

Average 

Average 

Export 

Domestic 

Export 

Domestic 

Export 

Domestic 

Export 

Domestic 

Price, 

Price, 

Price, 

Price, 

Price, 

Price, 

Price, 

Price, 

Cents 

Cents 

Cents 

Cents 

Dollars 

Dollars 

Cents 

Cents 

per 

per 

per 

per 

per 

per 

per 

per 

Gallon 

Gallon 

Gallon 

Gallon 

Barrel 

Barrel 

Gallon 

Gallon 

1913 

14.9 

15.6 

6.4 

7.9 

1.09 

1.06 

14.2 

15.4 

1914 

12.0 

13.0 

6.3 

7.6 

1 .  15 

.90 

13.7 

15.6 

1915 

12.0 

11.7 

6.0 

7.1 

1.16 

.72 

13.5 

14.9 

1916 

19.3 

18.9 

6.5 

7.9 

1.19 

1.04 

16.5 

18.3 

1917 

22.4 

20.6 

7.4 

8.5 

1.70 

1.57 

20.6 

19.5 

1918 

25.0 

21.7 

10.3 

10.2 

2.33 

2.01 

29.4 

30.9 

1919 

24.7 

22.2 

12.2 

12.7 

2.22 

1 .  59 

30.9 

32.2 

1920 

27.6 

26.5 

15.2 

17.1 

2.77 

2,79 

38.2 

49.0 

228     ANALYSIS  OF  THE  EXPORTS  OF  PETROLEUM  PRODUCTS 

export  prices  so  determined  with  the  average  domestic  prices  calcu- 
lated from  price  quotations  is  given  in  Table  105. 

It  may  be  observed  that  export  prices  for  gasoline  and  fuel  oil 
have  in  general  run  slightly  above  the  corresponding  domestic 
prices,  while  the  reverse  has  tended  to  be  true  of  kerosene  and 
lubricating  oils. 


641 


■•.180:- 


;-r,-p;,;r34^uf,'4r 


19 


18 


ioV^^'ISc^C^fgS 


FBAUCE 


UNITED    KINGDOM 


CANADA 


ITALY 

NEW   ZEALAND 
ARGENTINA 
GERMANY 
BRAZIL 


ALL  OTHERS 


FIGURES  ARE    MILLIONS  OF  GALLONS 


Fig.  107. — Destination  of  gaso- 
line and  naphtha  exported 
from  the  United  States  in  1920. 


UNITED   KINGDOM 


FRANCE 

NETHERLANDS 
BRITISH    INDIA 

JAPAN 

ITALY 

GERMANY 

DENMARK 

BELGIUM 

CANADA 


ALL  OTHERS 


FIGURES    ARE    MILLIONS    OF    GALLONS 

Fig.  108. — Destination  of 
kerosene  e.xported  from 
the  United  States  in  1920. 


Distribution  of  Exports. — The  countries  to  which  the  exports  of 
mineral  oils  are  consigned  are  given  in  full  detail  in  the  reports  of 
the  Bureau  of  Foreign  and  Domestic  Commerce.^     A  summary  of 

1  Monthly  Summary  of  Foreign  and  Domestic  Commerce,  and  Foreign  Com- 
merce and  Navigation  of  the  United  States  (Annual). 


DISTRIBUTION   OF  EXPORTS 


229 


such  data  for  the  year  1920  is  given  in  graphic  form  in  Figs.    107 
-110. 

Fig.  107  shows  that  over  half  of  the  gasoHne  exported  in  1920  went 


411 


862 


v.•:::1;87•:••^^ 


,;-/5r' 


yiti?jj2m 


UNITED    KINGDOM 


CANADA  \ 


NETHERLANDS 


MEXICO 
PANAMA 


ALL  OTHERS 


FIGURES  ARE   MILLIONS  OF  GALLOHS 


Fig.  109. — Destination  of  fiu'l 
and  gas  oil  o.xportctl  from  the 
United  States  in  1920. 


■  •.■.•66-. 


mnw? 


;°rsrAOoo<<.y?' 


UNITED   KUMGDQM 


SWEDEN 
ARGENTINA 


ALL  OTHERS 


FIGURES  ARE   MILLIONS  OF  GALLONSi 

Fic.  110. — Destination  of  lu- 
bricating oils  exported  from 
the  United  States  in  1920. 


to  France  and  the  United  Kingdom.     German}^  is  also  shown  as 
luiving  entered  the  market  in  appreciable  degree. 


230     ANALYSIS  OF  THE  EXPORTS  OP  PETROLEUM  PRODUCTS 

In  Fig.  108  is  seen  a  more  equable  division  of  kerosene  among  a 
greater  number  of  nations.  China  appears  as  a  large  foreign  con- 
sumer of  this  prockict,  second  only  to  the  United  Kingdom.  Ger- 
many ranks  along  with  Italy  and  Denmark. 


MONTHLY  AVERAGE 
BY  YEARS 


MONTHLY  AVERAGE 
BY  MONTHS 


1910 


1915 


GASOLINE 

AND 
NAPHTHA 


KEROSENE 


FUEL   OIL 

GAS   OIL 

AND 

RESIDUUM 


LUBRICATING 
OILS 


CRUDE 
PETROLEUM 


1920 


1919 


1920 


Fi(i.  111.^ — Exports  of  mineral  oils  from  the  United  States. 


The  destination  of  fuel  oil  exports  is  analyzed  in  Fig.  109,  which 
shows  the  United  Kingdom  and  Canada  as  the  leading  recipients, 
with  Italy,  Chile,  Netherlands  and  France  as  taking  second  place. 


CURRENT  TREND  OF  EXPORTS 


231 


Table  106. — Exports  of  the  Principal  Petroleum  Products  from  the 

United  States 

Data  from  Bureau  of  Foreign  and  Domestic  Commerce 

{In  millions  of  gallons) 


Monthly  Average 

Gasoline  and 
Naphtha 

Kerosene 

Fuel  Oil 

(Including  Gas 

Oil  and 

Residuum) 

Lubricating 
Oils 

1913 

16 

18 
24 
30 

35 

47 

93 
84 
70 
71 

55 
41 

36 
59 

68 
80 

94 
100 

17 
16 

20 

22 

23 
21 

1914 

1915 

1916 

1917 

1918 

1919 

January 

February 

March 

April 

31 

48.0 
27.0 
22.4 

27.6 
26.1 
31.8 

24.5 
29.6 
34.7 

40.5 
31.0 
29.2 

82 

68.4 
67.3 
54.3 

93.2 
79.9 
124 

76.2 
84.0 
75.6 

94.3 
65.5 
93.3 

1 
52 

74.6 
36.9 
36.9 

45.9 

42.6 
54.2 

44.8 
39.0 
38.6 

65.9 
81.6 
56.6 

23 

21.5 
26.9 
21.3 

30.1 
19.1 
25.1 

15.5 
20.7 
19.7 

23.9 
26.3 
27.5 

Mav 

June 

Julv 

August 

September 

October 

1         November 

December 

1920 

January 

February 

53 

30.6 
32.3 
47.1 

43.5 
69.0 
68.5 

81.8 
58.7 
39.9 

65.3 
40.0 
66.8 

72 
81.2 

75.7 
79.7 

67.7 
56.5 
62.0 

58.5 
74.6 
62.7 

69.6 

80.7 
89.7 

71 

74.6 
52.1 

67.8 

78.3 
69.8 
67.8 

78.9 
58.8 
59.9 

92.5 
65.2 

84.2 

34 

23.7 
33.2 
44.2 

38.7 
41.6 
26.5 

28.3 
34.2 

28.5 

32.5 
34.4 
50.5 

April 

May 

June 

July 

August 

September 

October 

November 

December 

1921 

January  

February 

March 

April 

Mav 

54.5 
53.6 

47.1 

57 . 0 
40.5 
38.6 

29.0 

79.1 
68 . 2 
63.9 

58.8 
51.9 
64.2 

36.0 

110 
72,9 
69.3 

72.3 
50 . 6 
62.  1 

76.8 

37.9 
30.5 
14.7 

22.6 
16.8 
15.  1 

18.9 

June 

July 

232     ANALYSIS  OF  THE  EXPORTS  OF  PETROLEUM  PRODUCTS 

Mexico  and  Panama  are  interesting  names  to  find  included,  since  the 
first-named  is  herself  a  prominent  producer  of  fuel  oil. 

Fig.  110  shows  the  distribution  of  American-made  lubricating  oils, 
which  in  1920  went  largely  to  the  United  Kingdom,  France,  Germany, 
Belgium,  and  Italy;  but  small  quantities  penetrated  practically 
every  country  in  which  manufacturing  is  carried  on.  If  the  indus- 
trial activity  of  the  United  States  is  approximately  equal  to  that 
of  the  rest  of  the  world,  as  would  appear  to  be  the  case  from  a  com- 
parison of  the  energj^  materials  used  here  and  abroad,  the  export 
figures  indicate  that  roughly  half  of  all  foreign  commerce  and  industry 
is  lubricated  by  the  products  of  American  petroleum.  In  terms  of 
world  figures,  these  estimates  go  to  show  that  approximately  three- 
quarters  of  the  lubricating  needs  of  the  entire  world  are  dependent 
upon  the  American  oil  industry. 

Current  Trend  of  Exports. — The  trend  of  exports  of  the  principal 
petroleum  products  by  months  during  1919  and  1920  is  shown  in 
Fig.  Ill  in  a  form  facilitating  comparison,  the  supporting  data  being 
presented  in  Table  106.  The  data  and  their  graphical  interpretation 
are  presented  as  an  example  of  a  convenient  method  for  following 
the  situation  currently. 

Future  of  Petroleum  Exports. — The  outstanding  foreign  market 
for  petroleum  products  is  Europe,  although  considerable  quantities 
of  kerosene  go  to  the  Far  East,  particularly  China,  and  South  America 
is  coming  in  for  a  growing  share  of  the  mineral  oils  sent  abroad. 
Since  the  armistice,  European  credits  have  been  in  an  unsettled 
condition,  although  throughout  1919  and  1920  Europe's  buying 
power  was  artificially  sustained  first  through  vast  loans  extended  by 
the  United  States  Government  and  later  on  through  credits  extended, 
in  part  indirectly,  by  American  banks.  For  the  coming  few  years, 
the  foreign  demand  for  American  goods  is  difficult  to  appraise,  but 
raw  materials  and  products  in  which  the  ratio  of  labor-cost  to  raw 
material  costs  is  low  (such  as  refined  mineral  oils),  may  be  expected 
to  enjoy  a  brisker  demand  abroad  than  goods  whose  values  are 
largely  fabricated  into  them. 

Taking  a  long-range  view  ahead,  we  are  faced  by  an  ultimate 
shortage  of  crude  petroleum  in  respect  to  the  requirements  of  the 
domestic  market  alone,  in  contrast  to  the  conditions  of  the  past  in 
which  an  oversupply  was  forced  to  seek  relief  abroad.  As  foreign 
oil-fields  become  more  actively  productive,  and  American  oil-fields 
commence  their  inevitable  decline,  the  proportions  of  American 
petroleum  products  shipped  abroad  may  be  expected  to  assume  a 
waning  role. 


CHAPTER  XVII 


PRICES  OF  PETROLEUM  AND  ITS  PRODUCTS 


Introduction. — For  the  purpose  of  analyzing  the  price  relations 
ships  of  crude  petroleum  and  its  products,  the  period  of  1913-1921 
was  selected,  and  weighted  average  monthly  prices  for  the  commodi- 
ties shown  in  Table  107  were  calculated  from  the  weekly  quotation- 
appearing  in  trade  journals. 

Table  107. — Data  Used  ix  Price  Analysis 


Commodity 

Quotation 

Composition  of 
Average 

Source  of  Data 

1 .  Crude  petroleum .  .  . 

2.  Gasoline 

3.  Kerosene 

At  wells 
Tank-wagon 
Tank-wagon 
At  refinery 

Jobbing 

Five  grades 

Five  cities 

Five  cities 

Five  locations 

Five  grades 

Average  of  Xos. 
2,  3,  4,  and  5 
327  commod- 
ities 

National  PetroleumNews 
National  Petroleum  News 
National  Petroleum  News 
National  Petroleum  News 
Oil,  Paint  and  Drug  Re- 
porter 

Monthly  Labor  Review, 
U.  S.  Bur.  Lab.  Stat. 

4.  Fuel  oil 

5.  Lubricating  oils .... 

6.  Petroleum  products. 

7.  All  commodities. . .  . 

Wholesale 

The  weighted  average  prices  so  obtained  were  then  recalculated  in 
percentages  of  the  respective  average  prices  for  the  year  1913,  thus 
getting  series  of  index  numbers  which  render  the  various  price 
trends  directly  comparable  with  one  another,  as  well  as  with  indices 
of  prices  in  general  which  are  similarly  compiled  by  the  Government 
and  other  agencies.  An  added  advantage  of  this  method  of  treat- 
ment is  that  reference  may  at  all  times  be  had  to  the  pre-war  price- 
level  of  1913. 

The  price  data  presented  in  this  chapter  are  a  continuation,  with 
some  minor  modifications,  of  the  price  figures  published  by  the  U.  S. 
Fuel  Administration  and  War  Industries  Board  in  1919,  where  refer- 
ence to  the  detailed  figures  for  the  period  1913-1918  may  be  had.^ 

1  Pogue  and  Lubin,  Prices  of  Petroleum  and  Its  Pro'Uicts  During  the  War, 
U.  S.  Fuel  Administration,  Washington.  1919,  55  pp.;  also  published  by  the 
War  Industries  Board  as  Part  36  of  History  of  Prices  During  the  War.  A 
portion  of  the  present  discussion  is  based  upon  that  investigation. 

233 


234 


PRICES   OF   PETROLEUM   AND   ITS   PRODUCTS 


Table   lOS. — Index  Numbers  of  the  Prices  of  Crude  Petroleum  and  Its 
Principal  Products  in  the  United  St.\tes  by  Months,  1913-1921 

{Prices  f„r  1013  =  100) 


Crude 

Petroleum 

at 

Wells 

Petroleum 
Products 

Gasoline 
Tank- 
wagon 

Kerosene 
Tank- 
wagon 

Fuel 

Oil 

at 

Refinery 

Lubricat- 
ing 
Oils, 

Jobbing 

All  Com- 
modities, 
U.  S.  Bur. 
Labor  Stat. 

1913,  Year 

Months: 
January.  .  . 
February. . 
March .... 

April 

May 

June 

July 

August .... 
September. 

October ,  .  . 
November. 
December  . 

100 

87 

95 

100 

99 
100 
100 

101 
10.3 
104 

104 
104 
lOG 

100 

101 
101 
101 

102 
102 
101 

101 
100 
100 

99 
98 
97 

100 

101 
103 
104 

104 
103 
103 

100 
99 
99 

99 
96 
93 

100 

99 
99 
99 

99 
101 
101 

101 
101 
101 

101 
101 
99 

100 

102 
100 
100 

105 
104 
101 

100 

102 

97 

96 
99 
96 

100 

100 
100 
100 

100 
100 
100 

100 
100 
100 

100 
100 
101 

100 

100 
100 
99 

98 
98 
100 

100 
101 
102 

101 

101 

99 

1914,  Year 

Months: 
January. . . 
February. . 
March .... 

April 

May 

June 

July 

August.  .  .  . 
September. 

October .  .  . 

November. 
December  . 

82 

107 
108 
106 

100 
83 

77 

75 
75 
67 

62 
61 
61 

89 

97 
96 
95 

95 
93 
91 

88 
85 
84 

83 

82 
82 

83 

94 
93 
92 

91 
90 

85 

81 

78 
77 

75 
73 
73 

97 

99 
99 
99 

99 
97 
97 

95 
90 
95 

95 
95 
95 

85 

99 
100 

98 

93 
91 
90 

83 
80 
73 

71 
70 
68 

101 

100 
100 
99 

102 
102 
102 

102 
102 
102 

102 
102 
102 

100 

100 
99 
99 

98 
98 
99 

100 
103 
104 

99 
98 
98 

1915,  Year 

Months: 
January. . . 
February. . 
March .... 

April 

May 

June 

July 

.4ugust.  . .  . 
September . 

October.  .  . 
November. 
December  . 

65 

62 
63 
58 

56 
55 
55 

55 
59 
73 

77 
80 
92 

80 

80 
78 
76 

76 
76 
76 

75 
76 

78 

85 
92 
98 

75 

73 
72 
69 

69 
69 
69 

66 
67 
71 

82 
91 
100 

90 

92 
90 
90 

87 
86 
86 

89 
89 
90 

91 
94 
99 

68 

67 
66 
61 

62 
62 
62 

64 
65 
66 

70 
83 
85 

97 

97 

95 
95 

95 
95 
95 

95 
95 
95 

100 
100 
104 

101 

99 
101 
99 

100 
101 
99 

101 
100 
99 

101 
103 
106 

PRICE   OF  CRUDE   PETROLEUM 


235 


Table  108. — Index  Numbers  of  the  Prices  of  Crude  Petroleum  and  Its 
Principal  Products  in  the  United  States  by  Months,  1913-1921 — {Cont.) 


Crude 

Petroleum 

at 

Wells 

Petroleum 
Products 

Gasoline 
Tank- 
wagon 

Kerosene 
Tank- 
wagon 

Fuel 

Oil 

at 

Refinery 

Iiubricat- 

ing 

Oils, 

Jobbing 

All  Com- 
modities, 
U.  S.  Bur. 
Labor  Stat. 

1916,  Year 

Months: 
January. .  . 
February.  . 
March .... 

April 

May 

June 

July 

August. ..  . 
September. 

October .  .  . 
November. 
December  . 

117 

108 
115 
123 

126 
130 
130 

129 
112 
101 

103 
106 
117 

114 

104 
109 
113 

113 
119 
119 

119 
118 
114 

113 
114 
114 

121  . 

Ill 
107 
125 

127 
129 
129 

129 
127 
120 

116 
114 
114 

101 

101 
102 
102 

105 
105 
105 

102 

100 

98 

98 
95 
96 

98 

99 
101 
102 

98 
88 
90 

91 
91 
95 

98 
109 
111 

119 

103 
103 
101 

101 
127 
127 

127 
127 
127 

127 
127 
127 

124 

110 
112 
114 

117 
118 
119 

119 
123 
128 

134 
144 
146 

1917,  Year 

Months : 
January. .  . 
February. . 
March.  .  .  . 

April 

May 

June 

July 

August .... 
September . 

October.  .  . 
November. 
December  . 

155 

130 
147 
148 

148 
149 
151 

152 
152 
170 

170 

170 
170 

130 

120 

125 
126 

127 
129 
129 

132 
132 
133 

135 
135 
137 

132 

122 
129 
130 

132 
132 
132 

132 
132 
135 

135 
135 
135 

108 

99 
102 
105 

105 
108 
108 

108 
108 
113 

111 
113 

lis 

147 

123 
130 
131 

131 
133 
138 

157 
157 
157 

165 
166 
175 

127 

127 
127 
127 

127 
127 
127 

127 
127 
127 

127 
127 
127 

176 

151 
156 
161 

172 
182 
185 

186 
185 
183 

181 
1S3 

182 

1918,  Year.  .  .  . 

Months: 
January. . . 
February. . 
March .... 

April 

May 

June 

July 

August. . .  . 
September. 

October .  .  . 
November . 
December  . 

194 

174 
177 
184 

193 
196 
196 

196 
197 
204 

204 
204 
204 

160 

152 
154 
156 

158 
162 
162 

162 
163 
164 

164 
164 
102 

139 

135 
135 
135 

135 
139 
139 

139 
141 
142 

142 
142 
142 

130 

124 
124 
124 

124 
129 
129 

129 
134 
130 

130 
136 
136 

189 

ISO 
179 
179 

187 
197 
198 

198 
193 
195 

104 
185 
184 

201 

183 
195 
199 

202 
202 
202 

204 
206 
206 

206 
203 
203 

196 

185 
186 
187 

190 
190 
193 

198 
202 
207 

204 
206 
206 

236 


PRICES   OF   PETROLEUM   AND   ITS   PRODUCTS 


Table   108. — Index  Numbers  of  the  Prices  of  Crude  Petroleum  and  Its 
Principal  Products  in  the  United  States  by  Months,  1913-1921 — (Cont.) 


Crude 

Petroleum 

at 

Wells 

Petroleum 
Products 

Gasoline 
Tank- 
wagon 

Kerosene 
Tank- 
wagon 

Fuel 

Oil 

at 

Refinery 

Lubricat- 
ing 
Oils, 
Jobbing 

All  Com- 
modities, 
U.  S.  Bur. 
Labor  Stat. 

1919,  Year 

Months: 
January.  .  . 
February. . 
March .... 

April 

May 

June 

July 

August. .  .  . 
September . 

October .  .  . 
November. 
December . 

197 

202 
197 
195 

192 
192 
192 

192 
192 
197 

197 
202 
208 

159 

166 
161 
158 

157 
157 
157 

158 
159 
160 

160 
159 
179 

142  . 

144 
142 
142 

142 
142 
142 

142 
142 
142 

142 
142 
142 

162 

139 
139 
141 

145 
150 
155 

169 
177 

178 

182 
182 
186 

149 

169 
150 
145 

135 
131 
129 

129 
131 
135 

140 
152 
237 

209 

216 
216 
210 

210 
206 
207 

207 
206 
205 

205 
205 
212 

212 

203 
197 
201 

203 
207 
207 

218 
226 
220 

223 
230 
238 

1920,  Year 

Months: 
January. .  . 
February. . 
March .... 

April 

May 

June 

July 

August. . .  . 
September . 

October .  .  . 
November. 
December  . 

301 

250 
260 
300 

30S 
312 
312 

314 
314 
314 

3H 

.312 
307 

225 

190 
202 
223 

228 
235 
242 

236 
238 
237 

230 
221 
215 

170 

148 
152 
161 

166 
168 
172 

172 
176 
180 

180 
179 
178 

217 

198 
201 
207 

211 
211 
216 

218 
229 
230 

226 
226 
226 

262 

219 
219 
270 

275 
304 
299 

294 
292 

284 

258 
230 
200 

318 

256 
295 
330 

334 
336 
361 

338 
334 
325 

316 
298 
292 

243 

248 
249 
253 

265 
272 
269 

262 
250 
242 

225 
207 
189 

1921: 

Months: 
January. .  . 
February. . 
March .... 

April 

May 

June 

July 

August..  .  . 

288 
192 
174 

176 
159 
127 

112 
110 

200 
176 
164 

160 
142 
137 

131 
129 

177 
160 
154 

151 
141 
137 

132 
129 

222 
189 
186 

178 
160 
146 

1.37 
137 

181 
135 
131 

131 
116 
102 

96 
97 

251 
218 
202 

194 
1.54 
154 

148 
148 

177 
167 
162 

154 
151 

148 

148 
152 

Index  numbers  for  six  series  of  oil  prices — crude  petroleum,  gaso- 
line, kerosene,  fuel  oil,  lubricating  oils,  and  these  four  petroleum 
products  averaged  into  a  composite — are  presented  in  Table  108, 
together   with   index   numbers   representing  the   run  of  wholesale 


PRICE  OF  CRUDE  PETROLEUM 


237 


prices  in  general  in  the  United  States.  The  last-named  series  of 
index  numbers,  representing  an  average  of  327  commodities  in  which 
due  allowance  is  made  for  the  relative  importance  of  the  different 
items,  are  those  calculated  by  the  U.  S.  Bureau  of  Labor  Statistics 
and  published  in  the  Monthly  Labor  Review — the  official  measure 
of  the  country's  wholesale  price-level. 

Price  of  Crude  Petroleum. — The  major  portion  of  the  crude  petro- 
leum produced  is  purchased  by  pipe-line  companies.  Nominally 
these  companies  transport  the  oil  at  tariff  rates,  but  actually  they 
buy  the  oil  outright,  paying  the  market  (posted)  rate  which  is  sup- 
posed to  be  the  delivered  price  at  the  refinery  less  transportation. 
The  price  in  a  given  district  is  determined  by  the  announcement,  or 
posting,  by  one  of  the  purchasing  concerns  of  the  price  it  will  pay. 
When  competition  exists,  the  other  purchasing  concerns  usually 
follow  at  once.  To  the  base-price  may  be  added  certain  premiums 
for  quality,  delivery,  credit,  etc.,  and  from  the  base-price  certain 
deductions  are  made  for  sand,  water,  etc. 

In  times  of  sharp  demand,  much  oil  is  purchased  at  a  premium 
above  the  posted  price,  whereas  in  periods  of  slack,  quantities  of 
oil  may  be  purchased  below  the  base-price.  The  following  premiums 
were  paid  by  one  independent  purchasing  concern  in  the  Mid- 
Continent  field  during  a  recent  four-year  period : 

Table  109. — Premiums  Paid  for  Crude  Petroleum  by  a  Purchasing  Concern 
IN  THE  Mid-Continent  Field 
(Data  from  Bates  and  Lasky) 


Year 

Millions  of  Barrels 
Purchased 

Millions  of  Dollar  s 
paid  in  Premiums 

Premium  per  Barrel 

1917 
1918 
1919 
1920 

216 

586 
841 

88 

18.5 
134 
494 

23 

8 . 5  cents 
22.9  cents 
58 .  75  cents 
26. 12  cents 

No  systematic  public  record  of  the  premiums  paid  is  kept,  so 
recourse  must  be  had  to  the  posted  prices  in  determining  the  trend 
of  the  crude  petroleum  market.  Index  numbers  representing  the 
weighted  average  of  the  posted  prices  of  five  grades  of  petroleum — 
Pennsylvania,  Illinois,  Kansas-Oklahoma,  Gulf  Coast  and  California 
— are  given  in  Table  108  and  plotted  on  a  ratio  scale  against  gasoline, 
kerosene,  fuel  oil,  and  lubricating  oils  in  turn  in  Figs.  112,  115,  116 
and  117. 

'  See  also  Fig.  122,  page  256,  in  which  the  average  price  of  crude  petroleum 
is  plotted  against  the  domestic  production  of  crude  petroleum. 


238 


PRICES   OF   PETROLEUM    AND   ITS   PRODUCTS 


There  were  nine  major  events  in  the  price  histor}-  of  crude  petro- 
leum in  the  nine-year  periotl  of  1913-1921,  to  which  the  crude  oils 
east  of  the  Rockj^  Mountains  were  closely  sympathetic,  with  Cali- 
fornia less  definitely  reactive.^  These  may  be  described  separately 
as  outstanding  features,  to  which  all  other  circumstances  are  subor- 
dinate, and  are  to  be  held  clear]}-  in  mind  as  carrj-ing  a  dominating 
influence  into  the  price  relations  of  petroleum  products.  (See  Fig.  112.) 


INDEX 
500 


300 
250 

200 


100 
90 

80 

70 


/ 
J 

c 

^UDE    PETROLEUM 

( 

/ 

i" 

GAS( 

ILINE 

/^ 

\ 

f             '  ' 

'r- 

\ 

/ 

I 
\ 
\ 
1 

/   ^ 

' 

' 

\ 

/ 

\. 

» 

/ 

1913 


1914 


1915 


1916 


1917 


1918 


1919 


1920 


192.1 


Fig.  112. — Relative  prices  of  crude  petroleum  and  gasoline  by  months,  1913-1921, 
in  percentages  of  the  average  figures  for  1913. (Average  prices  in  1913  =  100.) 

1.  The  1913  Period  of  Normal  Price  Advance. — The  j-ear  1913, 
together  with  the  early  months  of  1914,  was  characterized  by  a 
normal  advance  in  crude  prices  resulting  in  general  from  the  rapidly 
increasing  demand  for  petroleum,  and  in  particular  from  a  ten- 
dency toward  declining  production  in  the  Pennsylvania  field,  which 
reacted  to  bring  a  rise  in  price  and  inclined  to  set  the  pace  for  the 
rest  of  the  country. 

2.  The  Cuiihing  Overproduction  of  1914-1915. — The  strengthen- 
ing markets  of  1913  stimulated  a  countiy-wide  drilling  campaign, 
which  culminated  in  the  tapping  of  the  deep  sands  of  the  Gushing 

'  It  should  be  held  in  mind  that  the  petroleum  situation  in  Cahfornia  stands 
rather  sharply  apart  from  the  rest  of  the  country,  owing  chiefly  to  the  geographic 
and  commercial  individuality  of  that  section. 


PRICE  OF  CRUDE  PETROLEUM  239 

Pool  in  Oklahoma  in  April,  1914.  Production  "went  wild";  oil 
in  endless  quantities  poured  forth  from  a  multitude  of  wells  drilled 
in  frenzied  haste.  Excepting  in  California,  the  bottom  dropped  out 
of  the  entii'e  crude-oil  market.  The  price  slump  was  unprecedented 
in  the  history  of  the  oil  industry.  The  effect  upon  the  petroleum 
industiy  of  the  outbreak  of  the  European  war  in  Juh^,  1914,  was 
largely  drowned  in  the  flood  of  Gushing  oil. 

3.  The  Recovery  of  1915-1916. — Each  action  has  its  reaction  and 
Gushing  proved  no  exception.  By  August,  1915,  Gushing,  while 
still  productive,  had  run  its  course.  Encouraged  by  an  ever-accel- 
erating demand  for  gasoline,  and  by  the  purchase  and  removal  from 
the  open  market  of  large  quantities  of  surplus  Gushing  crude,  prices 
recuperated  with  even  greater  rapidity  than  they  had  declined,  and 
by  the  end  of  1915  the  market  was  just  surmounting  its  pre-Gushing 
level.  This  advance  continued  through  the  first  quarter  of  1916, 
but  after  the  manner  of  such  things  overreached  itself.  Overstim- 
ulated  drilling,  especially  in  the  Mid-Gontinent  field,  brought  a 
surplus  production  with  a  corresponding  price  depression,  far  less 
serious,  however,  than  the  disastrous  overproduction  of  the  Gushing 
days. 

4.  The  Minor  Slump  of  1916. — The  recovery  from  Gushing,  then, 
was  too  rapid.  There  came  a  temporary  relapse,  strongest  in  Mid- 
Gontinent  prices,  and  the  last  half  of  1916  saw  a  repetition  of  the 
Gushing  depression  on  a  minor  scale.  With  the  turn  into  1917, 
however,  the  recovery  was  complete. 

5.  The  War  Stimulus  of  1917-1(^18.— Vnder  the  stimulus  of  war 
conditions — strengthening  demands,  increasing  production  costs, 
eagerness  to  insure  adequate  increases  in  output,  and  the  general 
atmosphere  of  increasing  prices — the  prices  of  crude  advanced  at 
intervals  the  country  over,  until  in  early  1918  they  attained  a  height 
in  general  roughly  double  the  pre-war  level.  The  reaction  was  uni- 
form and  singularly  coincident  on  the  part  of  the  crude  petroleums 
of  the  entire  countiy. 

6.  The  Governme7ital  Stabilization. — The  tendency  toward  price 
advance  under  war  stimulus  was  checked  with  the  advance  of  25 
cents  per  barrel  in  Mid-Gontinent  crude  in  April,  1918,  and  def- 
initely controlled  in  the  latter  half  of  1918  by  a  plan  of  voluntary 
stabilization  put  into  execution  by  the  National  Petroleum  War 
Service  Gommittee  representing  the  petroleum  industry,  and  the  Oil 
Division  of  the  United  States  Fuel  Administration  representing  the 
Government. 1     Prices  wei-e  thus  staliilized  and  brought  under  check 

1  For  a  detailed. account  of  this  interesting  example  of  industrial  administra- 
tion consult  Pogue  and  Lubin,  Prices  of  Petroleum  and  Its  Products  During 
the  War,  pp.  20-29. 


240  PRICES   OF   PETROLEUM   AND   ITS   PRODUCTS 

on  the  assumption  that  further  advances  would  not  serve  as  a  suf- 
ficient additional  stimulus  to  production  to  justify  the  cost  to  the 
pubhc. 

7.  The  Post-war  Reaction  of  1919. — The  closing  year  of  the  war, 
with  its  insistent  demands  for  gasoline  and  fuel  oil,  strongly  stimu- 
lated the  production  of  crude  petroleum  and,  following  the  armistice, 
1919  opened  with  a  bountiful  output  that  faced  a  peace-time  adjust- 
ment in  requirements.  The  demand  for  gasoline,  adjusting  itself 
easily  to  the  changed  condition,  went  on  unabated,  but  the  demand 
for  fuel  on  fell  away,  leaving  an  oversupply  of  this  commodity.  In 
consequence,  the  price  of  light  crudes,  productive  of  gasoline,  suf- 
fered no  recession,  but  the  price  of  hea\'y  crudes  such  as  those  of  the 
Gulf  Coast  fell  slightly,  so  that  the  composite  curve  shows  a  moder- 
ate sagging  during  the  year. 

8.  The  Boom  Period  of  1920. — In  late  1919,  partly  because  of 
the  period  of  inflation  upon  which  the  business  of  the  entire  coun- 
try had  entered  and  partly  as  a  result  of  a  demand  for  fuel  oil  which 
had  been  actively  stimulated  by  the  efforts  of  the  oil  industry'  as 
well  as  by  the  circumstances  of  a  disastrous  coal  strike,  the  crude 
oil  market  showed  a  gathering  strength  which  culminated  in  a 
sharp  and  almost  unprecedented  rise  during  the  first  quarter  of 
1920.  Oil-field  activity  speeded  up  to  a  white  heat,  the  prices  of 
refined  products  leaped  forward  as  if  released  from  restraint,  and  the 
entire  field  of  oil  became  involved  in  a  period  of  frenzied  expansion 
on  a  scale  never  before  so  fully  experienced.  Then  came  deflation 
and  liquidation  in  the  industrial  structure  of  the  entire  country. 
But  oil  persisted  as  if  immune.  The  highest  levels  in  crude-oil 
prices  were  not  attained  until  July;  the  effect  of  these  rising  prices 
were  cumulative.  The  domestic  output  of  crude  petroleima  was  pro- 
gressively stimulated,  at  the  same  time  that  shipments  of  crude 
petroleum  from  Mexico  were  coming  to  this  count ly  in  unprecedented 
volume.  An  oversupply,  on  the  one  hand,  an  industrial  depression 
on  the  other — still  the  price  of  crude  petroleum  held  high.  Not 
until  the  close  of  the  year  did  crude  oil  prices  weaken,  and  then  only 
the  heavy  crudes  most  directly  affected  by  the  flood  of  oil  from 
Mexico.  The  year  closed  with  the  price  structure  of  crude  petro- 
leum overripe  for  a  tumble. 

9.  The  Price  Tumble  of  Early  1921. — During  the  first  two  months 
of  1921  the  inevitable  happened.  Between  the  first  week  in  Janu- 
s^rj  and  the  last  week  in  Februar}'  the  average  price  of  crude  cascaded 
from  $3.50  to  $1.98  a  barrel,  a  drop  of  43  per  cent.  In  all  parts  of 
the  country  but  California  the  declines  were  precipitous.  In  a  few 
brief  weeks,  the  levels  of  early  1918  were  attained.     The  rise  of 


PRICE  COMPARED   WITH  COST   OF   DRILLING 


241 


1920  and  more  had  been  eliminated.  Another  price  cycle  had  run 
its  course.  And  just  as  the  price  rise  of  early  1920  overreached 
itseK  and  led  to  the  subsequent  break  in  the  crude-oil  market,  so 
the  price  reaction  of  1921  went  to  undue  length,  lajdng  the  basis  for 
a  sensational  rise  in  price  later  on. 

Price'  Compared  with  Cost  of  Drilling. — The  price  of  crude  petro- 
leum, in  spite  of  many  downward  reactions,  has  been  trending  sharply 
upward  at  an  average  rate  of  22  per  cent  annually  during  the  eight- 
year  period  1913-1920.  (See  Fig.  121,  page  255.)  This  upward 
tendency  is  due  mainly  to  (a)  the  increasing  cost  of  drilling  arising 
from  the  greater  number  of  well-feet  per  barrel,  (6)  the  increased  cost 
of  materials  and  labor,  and  (c)  the  mounting  demand  for  oil  products. 
It  is  difficult  to  disentangle  and  separately  appraise  these  three  fac- 
tors, but  as  time  goes  on  (a)  and  (c)  may  be  expected  to  contribute  a 
further  impetus  upward,  although  (6)  is  tending  downward.  The 
items  of  cost  in  drilling  a  typical  oil-well  2500  feet  in  depth  in  the 
Mid-Continent  field,  in  percentages  of  the  average  figures  for  1913, 
are  presented  in  Table  110  for  successive  years  from  1913  to  1920, 
which  gives  a  measure  of  factor  (6)  noted  above. 

Table  110. — Cost  of  Drilling  and  Equipping  a  Typical  2o00-foot  Wkll  in 
THE  Mid-Continent  Field  by  Years,  1913-1920 

(Data  from  Bates  and  Lasky,  after  F.  W.  Swift) 

{In  percentages  of  the  figures  in  WIS) 


1913 

1914 

1915 

1916 

1917 

1918 

1919 

1920* 

Casing 

100 
100 
100 
100 

97 
166 
108 
106 

96 
180 
111 
106 

130 
216 
119 
121 

184 
246 
145 
154 

205 

277 
172 
185 

258 
382 
232 
225 

258 
382 
278 
223 

Contract  drilling 

Labor 

Miscellaneous 

Total 

100 

11.3 

115 

141 

181 

208 

267 

271 

*  Estimated  by  Bates  and  Lasky. 


The  total  cost  of  drilhng  as  presented  in  Table  110  in  percentages 
of  the  1913  cost,  is  plotted  in  Fig.  113  against  the  average  price  of 
Mid-Continent  crude  similarly  expressed.  This  chart  shows  how 
the  price  movement  in  periods  of  oversupply,  such  as  the  year  1915, 
lags  behind  drilling  costs,  and  in  periods  of  strong  demand  such  as 
1920  rises  above  the  cost  of  drilling  level. 

The  Price  of  Gasoline. — As  representative  of  the  wholesale  price 
of  gasoline,  the  tank-wagon  prices  at  five  populous  cities  in  various 


242 


PRICES   OF   PETROLEUM   AND   ITS   PRODUCTS 


parts  of  the  country — New  York,  Baltimore,  Chicago,  Kansas  City 
and  San  Francisco — were  averaged  and  recalculated  in  percentages 
of  the  average  price  in  1913.  The  index  numbers  so  obtained  are 
given  in  Table  108,  and  plotted  in  comparison  with  the  price  trend 
of  crude  petroleum  in  Fig.  112.  It  cannot  be  emphasized  too  strongly 
that  gasoline  is  a  joint  product  with  kerosene,  fuel  oil,  and  lubricants, 

and  accordingly  that 
the  price  of  gasoline 
cannot  be  interpreted 
as  a  separate  matter, 
but  is  intelligible  only 
in  terms  of  price  fluc- 
tuations of  crude  pe- 
troleum on  the  one 
hand,  and  of  kerosene, 
fuel  oil,  and  lubricants 
on  the  other. 

The  outstanding 
features  in  the  course 
of  gasoline  prices  are 
eight  in  number. 

1.  The  Relative  Sta- 
bility of  1913.— Gaso- 
line conmicnced  1913 
with  slight  advances 
in  price  in  keeping 
with  the  upAvard  trend 
in  the  crude  market, 
but  after  the  first 
c}uarter  of  the  year, 
1914     1915    1916    1917    1918    1919    1920       gasoline     prices     fell 

„,,„,,  .  f  ^u     •  •         +     (•      away       gently       but 

Fig.  113. — Comparison   of  the   increase   m   cost  oi   a  •  .       . 

typical  well  with  the  increase  in  price  of  crude  steadily  m  opjiosition 
petroleum  in  the  Mid-Continent  Field,  1913-1920;  to  the  continued  up- 
data  from  Bates  and  Lasky.   (Figures  for  1913  =  100.)  ward  trend   of    crude. 

The  departure,  how- 
ever, was  slight  and  to  be  attributed  to  local  variations,  perhaps 
fortuitous,  and  certainly  with  little,  if  any  broad  significance.  This 
period,  on  the  whole,  was  uneventful  and  characterized  by  stability. 
2.  The  dishing  Depression. — The  gasoline  response  to  the  Cushing 
overproduction  was  immediate  and  striking.  With  the  serious 
impairment  of  the  crude-oil  market,  the  price  of  gasoline  responded 
with  an  almost  parallel  slump. 


THE   PRICE  OF  GASOLINE  243 

3.  The  Recovery  of  1915-1916. — Closely  paralleling  the  recovery 
of  the  crude  market  following  the  culmination  of  the  Gushing  episode, 
and  as  a  result  of  the  same  range  of  causes,  gasoline  advanced  over 
60  per  cent  between  July,  1915,  and  May,  1916,  attaining  a  price- 
level  scarcely  less  than  that  prevailing  at  the  end  of  1918.  The 
suddenness  of  the  advance  in  respect  to  a  product  in  universal  use, 
following  so  closely  upon  the  heels  of  an  era  of  cheap  gasoline,  created 
country-wide  interest  and  concern  and  led  to  an  investigation  on  the 
part  of  the  Federal  Trade  Commission,  which  reported  "  that  a 
decreasing  supply  of  light  crudes,  coupled  with  increasing  foreign 
and  domestic  demands,  explains  a  part  of  the  advance  in  gasoline 
prices  during  1915,  but  that  part  of  the  advance  in  certain  sections 
at  least,  was  unnecessary  and  to  a  certain  extent  due  to  artificial 
conditions.  ..."  But  whatever  the  validity  of  these  conclusions, 
which  must  be  judged  on  their  own  merits,  the  situation,  whether 
complicated  by  artificial  conditions  or  not,  was  the  response  or,  more 
properly,  the  over-response,  to  the  lavishness  of  the  Gushing  out- 
pouring of  crude. 

4.  The  Relapse  of  1916.— In  the  latter  half  of  1916,  gasoline 
shared  in  the  relapse  of  crude  with  a  slump  east  of  the  Rockies. 
California  serenely  weathered  this  storm,  whose  effects  did  not  reach 
the  Pacific  slope. 

5.  The  Period  of  War  Stress. — The  relapse  of  1916,  as  with  crude, 
was  short-lived;  gasoline  recovered  its  former  price-level  in  early 
1917,  and  to  the  end  of  1918  held  a  remarkably  level  course,  as  com- 
pared with  the  other  petroleum  products,  and  particularly  with 
commodities  in  general.  The  Chicago  market  during  this  time 
showed  a  series  of  advances,  reflecting,  together  with  the  situation 
there  for  kerosene,  local  instal)ilities  of  a  significant  order. 

A  uniform  price-level  for  gasoline  during  a  period  when  prac- 
tically all  other  commodities  were  soaring  is  remarkable  and  was 
only  attained  by  virtue  of  the  joint-product  character  of  gasoline, 
which  pcnniitted  its  potential  advances  to  be  covered  b}^  k(!rosene, 
fuel  oil,  and  lubricants.  Increases  that  might  have  come  about  in 
the  last  half  of  1918  were  forestalled  by  the  plan  of  voluntary  stabili- 
zation already  adverted  to,  which  reflected  an  indirect  influence  over 
gasoline  and  the  other  main  petroleum  products. 

6.  The  Stable  Level  of  1919. — Although  petroleum  production  was 
stimulated  by  the  war,  the  requirements  for  gasoline  were  so  pre- 
dominantly domestic  that  the  coming  of  peace  did  not  create  an  over- 
supply  of  this  fuel.  The  price  of  gasoline,  in  consequence,  main- 
tained a  nearly  even  level  throughout  1919.  The  supply  of  gasoline 
was  somewhat  easier  than  in  the  previous  year,  but  surplus  failed 


244  PRICES  OF  PETROLEUM   AND   ITS   PRODUCTS 

to  accumulate  sufficiently  to  create  a  significant  downward  revision 
in  prices. 

7.  The  Sharp  Rise  of  1920. — In  1920,  in  common  with  crude, 
petroleum  products,  and  commodities  in  general,  gasoline  enjoyed  a 
marked  rise  in  price,  but  a  rise  of  relatively  temperate  character  in 
comparison  with  nearly  all  other  commodities.  The  advance  was 
less  precipitous  than  that  for  crude  petroleum,  and  the  1920  high 
was  attained  later  in  the  year. 

8.  The  Price  Decline  of  Early  1921. — During  the  last  quarter  of 
1920,  the  highly  stimulated  character  of  oil-field  operations  both 
domestic  and  Mexican,  and  the  continued  activity  of  the  oil-refining 
industry,  in  the  face  of  the  gathering  storm  of  business  depression, 
led  to  an  easing  off  of  gasoline  prices  which  broke  into  a  sharp  decline 
in  early  1921.  As  gasoline  had  risen  to  lesser  heights  than  had  its 
joint-products  and  its  raw  material,  its  decline  was  accordingly  less 
drastic,  although  the  spot  price  of  gasoline  at  the  small  refineries  in 
many  instances  fell  below  the  cost  of  production. 

On  the  whole  there  is  a  notable  coincidence  between  the  price  of 
crude  and  the  price  of  gasoline.  All  the  main  features  of  the  former 
are  reflected  in  the  latter,  in  modified  form.  Rarely,  and  only  with 
local  meaning,  do  the  two  courses  run  counter.  Again  there  is  a 
notable  coincidence  to  be  followed  between  gasoline  prices  in  the 
various  cities,  the  difference  corresponding  roughly  to  a  transporta- 
tion differential  in  respect  to  the  sources  of  raw  material,  compli- 
cated by  the  sectional  character  of  the  gasoline  market.  In  view  of 
the  wide  difference  in  production  costs,  the  varying  strengths  of  the 
demands  for  products  turned  out  along  with  gasoline,  and  the  geo- 
graphical disposition  and  structure  of  the  industrial  units  concerned, 
the  comparative  uniformity  in  price  is  more  striking  than  the  minor 
divergences.  But  a  product  in  universal  use  must  normally  attain  a 
fairly  uniform  countr^^wide  level,  leaving  its  joint-products  to  level 
off  the  differences  in  production  costs;  and  hence  it  is  not  surprising 
that  gasoline  shows  greater  price  uniformity  than  other  petroleum 
products. 

The  Price  of  Kerosene. — Since  nearly  half  of  the  kerosene  pro- 
duced in  the  United  States  is  exported,  conditions  abroad  weigh 
heavily  in  influencing  the  domestic  market.  The  average  domestic 
price  by  years  from  1913-1920  is  compared  graphically  with  the 
average  export  price  in  Fig.  1 14,  which  shows  a  fair  correspondence 
between  the  two,  with  a  tendency  for  the  export  price  to  lag  slightly 
behind  the  domestic  price. 

The  average  domestic  price  of  kerosene,  in  percentages  of  the  1913 
figures,  is  shown  by  months  for  the  period  1913-1921  in  Table  108  and 


THE   PRICE  OF   FUEL  OIL 


245 


CENTS   PER 
GALLON 
20 


plotted  against  the  price  of  crude  petroleum  in  Fig.  115.  The  price 
trend  for  kerosene  shows  responses 
to  all  the  major  events  involved  in 
the  price  of  crude  petroleum,  except 
the  slight  reaction  of  1919  during 
which  period  kerosene  steadily  ad- 
vanced in  price. 

Throughout  1917, 1918, 1919  and 
most  of  1920,  kerosene  displayed  a 
sharp  and  strikingly  consistent  up- 
ward tendency.  This  course  was 
especially  notable  in  view  of  the 
demoralization  of  the  normal  foreign 

demand  during  much  of  that  period.  i9h  1915  1916  1917  1918  1919  192a  1921 

The  explanation  lies  in  part  in  war  Fig.  114.— Comparison  of  the  aver- 
requirements  and  related  causes,  age  export  price  with  the  average 
and  in  part  in  the  rise  of  automotive       domestic  price  of  kerosene  by  years, 

,  1    r      1  1913-1920. 

demands  lor  kerosene. 

The  Price  of  Fuel  Oil.— The  fuel-oil  market  is  complicated  by 

extensive  sales  on  contract,  with  the  result  that  much  of  the  output 

changes  hands  at  prices  more  or  less  at  variance  with  the  spot  quo- 


/ 

/ 

/ 

/ 

AVR.   dAm.  P 

^•^ 

/ 1 

^ 

^^ 

y 

, 

' 

—  - 

^..d^VR. 

;xp. 

•RICE 

1913        1914 


1915 


1916 


1917        1918 


1919 


1920 


1921 


Fig.  115. — Relative  prices  of  kerosene  and  crude  petroleum  by  months,  1913-1921, 
in  percentages  of  the  average  figures  for  1913.    (Average  prices  in  1913  =  100.) 


24Q 


PRICES   OF   PETROLEUM   AND   ITS   PRODUCTS 


tations.  In  consequence,  the  fuel-oil  chart  representing  an  average 
of  spot  quotations  must  be  allowed  a  larger  margin  of  error  than  is 
to  be  accorded  the  other  price  cui-ves  in  this  chapter. 

Although  the  variations  in  the  price  of  fuel  oil  are  numerous  and 
abrupt,  there  is  a  notable  conformance,  both  in  trend  and  in  actual 
level,  to  the  price  of  crude  petroleum.  (See  Fig.  116.)  This  arises 
from  the  fact  that  crude  petroleum  is  always  open  to  purchase  as  a 
natural  fuel  oil,  and  hence  fuel  oil  proper  normally  seeks,  and  can 

INDEX 

500 


400 

300 
250 

200 
150 

100 
90 
80 

70 
60 

50 


•A 

'i 

c-^^ 

^'""'1 

1 

.    /N^    - 

^~\ 

«-FUEL   C 

ML 

v 

I 

/'      V/' 

/  Y 

'\\y 

A 

1  ^ 

'•\ 

/ 

\ 

\J 

'\ -.**-< 

!RUDE    PI 

TROLEU 

A 

1913        1914        1915        1916        1917        191G        1919        1920        1921 


Fig.  116. — Relative  prices  of  fuel  oil  and  crude  petroleum  by  months,  1913-1921, 
in  percentages  of  the  average  figures  for  1913.     (Average  prices  in  1913  =  100.) 


scarcely  exceed,  the  level  established  by  the  price  of  crude.  By 
virtue  of  this  price  affiliation  the  factors  adduced  to  interpret  the 
run  of  prices  in  regard  to  crude  petroleum  are  likewise  applicable  to 
fuel  oil. 

In  addition  to  the  influences  affecting  the  price  of  fuel  oil 
already  reviewed  under  the  heading  of  crude  petroleum,  there 
should  be  mentioned  the  seasonal  variations  in  demand,  which, 
involving  a  stronger  demand  in  winter  than  in  summer,  create  a 
tendency  for  prices  to  rise  in  the  autumn  and  to  fall  in  the  spring. 
This  inclination  for  much  of  the  period  covered  in  Fig.  116  was  hidden 
by  stronger  forces,  but  it  came  definitely  into  play  during  the  winter 
of  1917-1918;    when  an  unusually  severe  season,  a  coal  shortage, 


PRICE   OF   LUBRICATING   OILS  247 

and  a  transportation  tie-up  sent  fuel-oil  prices,  in  the  northeastern 
states  in  particular,  to  unprecedented  levels.  In  consequence  of  a 
general  policy  toward  substituting  fuel  oil  for  coal  in  growing  degree, 
the  demand  for  fuel  oil  became  so  insistent  that  the  gasoline  demand, 
which  for  some  time  had  set  the  pace,  was  forced  into  second  place, 
and  the  call  for  fuel  oil,  with  direct  reference  to  munitions  man- 
ufacture and  naval  operations,  became  the  dominant  note.  It  was 
by  virtue  of  these  conditions  more  than  any  others  that  gasoline 
was  freed  from  the  responsibility  of  supporting  the  advances  in  the 
price  of  crude  petroleum  during  this  period. 

Toward  the  summer  of  1918,  while  industrial  operations  were  still 
increasing  apace,  the  demand  for  fuel  oil  became  tempered  by  the 
seasonal  factor,  while  in  August  the  plan  of  stabilization  of  oil 
prices,  under  the  joint  auspices  of  the  U.  S.  Fuel  Administration  and 
the  Petroleum  War  Service  Committee,  came  into  play  with  due 
effect.  Together  these  factors  halted  the  advance,  which  turned 
into  a  decided  decline  when  November  announced  the  termination  of 
European  hostilities  and  threw  the  United  States  into  a  hesitant 
industrial  mood.  Thus  the  cycle  was  completed,  and  the  motor-fuel 
demand  reassumed  the  role  of  prime  stimulator  of  the  petroleum 
industry. 

During  1919  no  adequate  place  was  found  for  the  war-stimulated 
output  of  fuel  oil,  and  prices  fell  sharply  and  deeply.  Gasoline 
requirements  went  on  increasing,  thus  inducing  a  growing  output  of 
fuel  oil  even  in  the  face  of  the  falling  market.  Under  these  circum- 
stances, the  petroleum  industry  projected  a  spectacular  and  effective 
campaign  in  favor  of  the  general  use  of  fuel  oil  for  industrial  and 
heating  purposes.  This  effort  began  to  show  results  toward  fall  and 
after  the  coal  strike  in  the  bituminous  fields  in  November,  the  price 
of  fuel  oil  in  the  single  month  of  December  recovered  from  its  post- 
armistice  depression,  and  by  May,  1920,  had  reached  a  level  fully 
50  per  cent  above  its  1918  attainments.  Then  came  the  break  in 
commodity  prices  and  the  rumblings  of  the  industrial  depression 
that  was  on  the  way;  fuel  oil  was  among  the  first  of  the  petroleum 
products  to  respond,  mildly  at  first  and  then  precipitously.  In  a 
few  brief  months  the  entire  rise  of  1919-1920  was  wiped  out,  and  by 
March,  1921,  the  low  levels  of  1919  had  again  been  reached.  The 
price  rout  was  added  to  in  no  small  degree  by  the  flood  of  Mexican 
oil  that  poured  into  this  country  in  ever-increasing  quantities  in  late 
1920  and  early  1921. 

Price  of  Lubricating  Oils. — Lubricating  oils  are  highly  fabricated 
commodities,  with  a  wide  range  of  grades  as  compared  with  gasoline, 
kerosene,  and  fuel  oil.     A  characteristic  price  average  for  lubricants 


248 


PRICES   OF   PETROLEUM   AND   ITS   PRODUCTS 


is  difficult  to  calculate,  as  there  is  no  centralized  record  correlating 
quantities  of  output  with  prices.  A  fairly  satisfactory  composite, 
however,  may  be  made  b}^  taking  a  weighted  average  of  five  com- 
mon grades  on  the  New  York  jobbing  market — paraffin  903,  red 
paraffin,  dark  steam  refined,  spindle  No.  200,  and  spindle  No.  150. 
To  free  the  view  as  far  as  possible  from  extraneous  factors,  such  as 
the  cost  of  containers,  the  prices  quoted  were  selected  to  represent 
the  basic  oils  from  which  the  brands  coming  on  the  market  are  com- 
pounded.    Sales  of  lubricating  oils  are  to  a  considerable  extent  made 


INDEX 

400 


100 
90 


A 

L 

JBRICATII 

IG  OILS—- 

j:        ^ 

1 
1 
1 

r^-. 

I 

\ 

;- 

fr^ 

'>~ y-' 

\ 

> 

1 

1 

1 

1 
\ 
\ 
\ 

/''  \ , 

/ 

; 

V       /  ' 

v_ 

.4- 

CRUDE    F 

ETROLEU 

M 

\ 

1913 


1914 


1915 


1916 


1917 


1918 


1919   1920 


1921 


Fig.  117. — Relative  prices  of  lubricating  oils  and  crude  petroleum  by  naonths, 
1913-1921,  in  percentages  of  the  average  figures  for  1913.  (Average  prices 
in  1913  =  100.) 

on  contract,  but  the  spot  prices  reflect  the  market  with  reasonable 
accuracy. 

The  relative  price  course  of  lubricating  oils  for  the  period  under 
view  is  shown  in  Table  108  and  plotted  against  the  price  trend  of  crude 
petroleum  in  Fig.  117.  Considering  the  fact  that  lubricating  oils  are 
manufactured  from  only  a  portion  of  the  crude  petroleum  run  to 
refineries  in  this  country',  a  notably  close  coincidence  in  the  price 
curves  of  the  two  is  to  be  observed,  although  the  price  of  lubricants 
tends  to  be  somewhat  more  stable  than  the  price  of  crude  petroleum. 
Up  till  recent  years,  the  supply  of  lubricants  was  derived  almost 


RELATION  OF  OIL  PRICES   TO   COMMODITY   PRICES    249 

exclusively  from  Eastern  crudes,  but  a  growing  share  is  now  being 
made  from  the  Mid-Continent,  Gulf  Coast,  and  Cahfornia  petroleum. 
Reference  to  Fig.  117  shows  that  the  price  of  lubricating  oils  held 
a  fairly  even  course  from  the  beginning  of  1913  to  early  1916,  in 
the  face  of  strong  price  disturbances  prevailing  elsewhere  in  the 
petroleum  industiy.  In  April,  1916,  there  came  a  sharp  rise  in  price- 
level,  following  the  initial  recovery  of  the  crude  market  from  the 
Gushing  depression  and  the  growth  of  orders  for  future  delivery. 
For  the  remainder  of  1916  and  practically  all  of  1917,  lubricants 


1913 


1914 


1915 


1916 


1917 


1918 


1919 


1920 


1921 


Fig.  118. — Relative  prices  of  crude  petroleum,  petroleum  products,  and  all 
commodities  by  months,  1913-1921,  in  percentages  of  the  average  figures 
for  1913.     (Average  prices  in  1913  =  100.) 


remained  stable,  showing  few  of  the  fluctuations  elsewhere  taking 
place.  The  beginning  of  1918,  however,  saw  an  abrupt  ascent  to 
prices  well  above  those  of  1916-1917,  with  further  advances  in  early 
1918  to  twice  the  pre-war  level,  to  be  explained  by  a  combination  of 
circumstances — increases  in  the  cost  of  high-grade  crude,  general 
domestic  conditions  of  stress  and  high  costs,  transportation  con- 
gestion, shortages  in  special  grades,  and  the  ever-increasing  growth 
of  demand.  From  then  on  to  late  1919  there  was  little  change  in 
level. 


250 


PRICES   OF   PETROLEUM   AND   ITS   PRODUCTS 


VALUE  RELATIONSHIPS  OF  THE  PETROLEUM  INDUSTRY     251 


MILLIONS 
OF   DOLLARS 
1600 


In  early  1920,  In  sympathy  with  markets  in  general,  the  price  of 
lubricants  rose  to  unprecedented  heights,  surmounting  the  whole 
price  structure  of  petroleum.  But  this  increase  was  short-lived; 
lubricants  proved  to  be  closely 
sympathetic  in  price  with 
commodities  in  general  and 
followed  the  country's  price- 
level  downward  during  its 
entire  descent  to  early  1921, 
thus  anticipating  by  several 
months  the  fall  in  price  of 
crude  petroleum.  This  im- 
mediate reaction  to  the  in- 
dustrial depression  is  readily 
understandable  in  view  of 
the  far-reaching  emplojmient 
of  lubricants  in  industry. 

Relation  of  Oil  Prices  to 
Commodity  Prices. — In  order 
to  bring  the  trend  of  prices 
in  the  petroleum  industry 
into  a  still  more  summarized 
view,  the  relative  prices  for 
(a)  crude  petroleum,  and  (b) 
petroleum  products  (weighted 
average  of  gasoline,  kerosene, 
fuel  oil,  and  lubricants),  are 
plotted  in  Fig.  118  against 
the  price-level  of  all  commo- 
dities as  determined  bj^  the 
U.  S.  Bureau  of  Labor  Statis- 
tics. An  interesting  confor- 
mance between  the  three 
curves  is  to  be  observed, 
petroleum  products  tending 
to  take  a  position  in  sym- 
pathy with  the  trend  of  crude 
petroleum  on  the  one  hand, 
and    with    all    commodities 

on  the  other.  The  reaction  of  both  crude  petroleum  and  petroleum 
products  to  the  decline  of  commodity  prices  in  1920-1921  is  worthy 
of  special  study,  with  particular  regard  to  the  sequence  in  the  decline 
of  the  three  items.     It  is  an  open  question,  however,  whether  petro- 


1916 


1917 


1918        1919 


1920 


Fig.  120. — Value  of  the  domestic  production 
of  crude  petroleum  and  its  principal  prod- 
ucts by  years,  1916-1920. 


252 


PRICES   OF   PETROLEUM   AND   ITS   PRODUCTS 


leum  prices  will  foUow  commodity  prices  throughout  the  entire 
future  course  of  the  latter,  since  technical  factors  pecuUar  to 
petroleum  are  shaping  up  which  may  ultimately  create  a  price 
divergence. 

The  elevation  of  various  groups  of  prices  in  1920  above  the  pre- 
war level  of  1913  is  illustrated  in  Fig.  119.  The  price-level  of  gaso- 
line is  especially  noteworthy  in  this  connection. 

The  Value  Relationships  of  the  Petroleum  Industry. — The  aver- 
age prices  calculated  for  the  present  chapter,  in  conjunction  with 
production  statistics  available  from  official  sources,  afford  the  means 
for  evaluating  the  output  of  the  American  petroleum  industry. 
The  value  of  the  crude  petroleum  and  the  principal  petroleum 
products  turned  out  in  the  United  States  by  years  from  1914-1920 
is  accordingly  presented  in  Table  111. 

Table  111. — Estimated  Value  of  the  Output  of  the  American  Petroleum 
Industry  by  Years,  1914-1920 

{In  millio7is  of  dollars) 


Year 

Crude 
Petroleum 

Gasoline 

Kerosene 

Fuel  Oil 

Lubricating 
Oils 

Total  of  Four 
Products 

1914 

214* 

125 1 

97t 

84t 

56 1 

362 1 

1915 

179* 

...4 

...4 

...4 

...4 

...4 

1916 

3.31* 

389 

115 

116 

114 

734 

1917 

523* 

587 

147 

243 

147 

1124 

1918 

704* 

775 

186 

352 

260 

1573 

1919 

850 

879 

298 

291 

273 

1741 

1920 

1520 

1294 

396 

580 

514 

2784 

*  U.  S.  Geological  Survey. 

t  1914  Census  of  Manufactures. 

t  Omitted  because  of  the  lack  of  production  statistics  for  1915. 


The  figures  appearing  in  Table  111  are  shown  in  graphical  form 
in  Fig.  120,  in  which  a  comparative  view  may  be  gained  of  the 
increase  in  value  of  crude  petroleum  and  its  principal  products  over  a 
period  during  which  the  industiy  enjoyed  a  mounting  output  coupled 
with  a  rising  price-level. 


CHAPTER   XVIII 

RELATION  BETWEEN  PRICE  AND  PRODUCTION  OF  CRUDE 

PETROLEUM 

The  production  of  crude  petroleum  depends  upon  many  related 
variables  such  as  strength  of  demand,  difhculty  of  exploitation, 
intensity  of  search,  element  of  chance,  and  many  others.  The  inter- 
play between  production  and  the  composite  of  these  variable  factors 
is  reflected  in  price,  and  a  comparison  of  price  with  production 
should  yield  results  of  value,  although  the  problem  of  correlation  is 
too  complex  to  be  fully  solved  with  available  data  and  methods  of 
analysis.  The  present  chapter  attempts  to  measure  the  two  key 
elements  in  the  crude  petroleum  situation  in  the  United  States  and 
to  establish  so  far  as  possible  the  degree  to  which  a  relationship 
between  the  two  exists. 

The  basis  of  the  investigation  is  quantitative  data  on  production 
and  price,  and  qualitative  data  on  all  the  other  factors  commonly 
recognized  as  entering  into  the  situation.  The  period  investigated 
is  from  1913  to  1920,  inclusive.  The  production  data  are  the  figures 
on  marketed  production  compiled  by  the  U.  S.  Geological  Survey; 
the  price  data  represent  a  weighted  average  of  the  average  monthly 
price  of  five  grades  of  crude  petroleum,  the  original  quotations  being 
the  posted  price  at  the  wells  as  given  by  the  National  Petroleum 
News.^  The  data  on  production  and  prices  are  presented  in  Table 
112.  The  data  on  the  price-level  of  all  commodities  are  the  index 
ninnbers  calculated  by  the  U.  S.  Bureau  of  Labor  Statistics  and 
published  in  the  Monthly  Labor  Review. 

Trend  of  Production,  Consumption,  and  Price  by  Years. — A 
broad  ]iicture  of  the  production,  consumption,  and  average  price  of 
crude  petroleum  in  the  United  States  by  years  from  1913  to  1920  is 

•  The  five  grades  are  Pennsylvania,  Illinois,  Kansas-Oklahoma,  Gulf  Coast 
(Humble)    and   California    (14°-17.9°),    and   the  weighted   average   is   derived 

according  to  the  formula,   .      A    more    elaborate    method    ot 

6 

weighting  was  tried,  whereby  the  prices  were  combined  in  proportion  to  the 

production  of  the  respective  fields,  but  sufficient  divergence  from  the  simpler 

method  was  not  found  to  warrant  the  more  laborious  calculations. 

253 


254 


RELATION    BETWEEN    PRICE    AND    PRODUCTION 


Table  112. — Marketed  Production  and  Average  Price  of  Crude  Petroleum 
IN  the  United  States  by  Months,  1913-1920 

{Production  in  millions  of  barrels.     Price  iii  dollars  per  barrel) 


1913 

1914 

1915 

1916 

Prod. 

Price 

Prod.* 

Price 

Prod.* 

Price 

Prod. 

Price 

January. . 
February . 
March. . .  . 

April 

May 

June 

July 

August.  .  . 
September 

October. . . 
November 
December 

Year 

19.5 

18.2 
20.4 

20.6 
21.3 
20.9 

21.5 
21.1 
20.5 

21.3 

20.8 
21.7 

248 

0.99 
1.08 
1.14 

1.13 
1.14 
1.14 

1.15 
1.18 
1.19 

1.19 
1.19 
1.21 

1.14 

21.9 

20.1 
23.7 

22.9 
24.2 
23.8 

23.7 
20.6 
20.1 

22.4 
21.1 
21.0 

266 

1.22 
1.23 
1.21 

1.14 
.95 

.88 

.86 
.85 
.76 

.71 

.70 
.70 

.93 

21.0 
20.3 

22.7 

26.1 
22.7 
23.4 

24.8 
23.7 
23.4 

24.0 
23.8 
25.1 

281 

.71 

.72 
.66 

.64 
.63 
.63 

.63 
.67 
.83 

.88 

.92 

1.05 

.75 

23    1 

22.7 
25.5 

24.0 
26.0 
25.5 

25.3 
25.2 
25.3 

26.7 
25.3 
25.9 

301 

1.23 
1.31 
1.40 

1.48 
1.49 
1.49 

1.47 
1.27 
1.15 

1.17 
1.21 
1.33 

1.33 

1917 

1918 

1919 

1920 

Prod.          Price 

i 

Prod. 

Price 

Prod. 

Price 

Prod. 

Price 

January . . 
February . 
March.  .  . 

April 

May 

June 

July 

August. . . 
September 

October.  . 
November 
December 

Year 

26.3 
23.7 
28.0 

27.1 
27.6 

27.4 

29.1 
29.7 
29.6 

30.4 

28.7 
27.6 

335 

1.49 
1.67 
1.68 

1.68 
1.70 
1.72 

1.74 
1.74 
1.74 

1.94 
1.94 
1.94 

1.77 

27.3 
25.9 
29.7 

29.0 
30.4 
29.9 

31.8 
30.6 
30.4 

31.3 
29  9 

29.8 

356 

1.98 
2.01 
2.10 

2.20 
2.24 
2.24 

2.24 
2.25 
2.33 

2.33 
2.33 
2.33 

2.22 

30.2 
26.9 
30.2 

29.4 
30.0 
31.6 

33.9 
33.9 
33.7 

33.3 
32.1 
32.5 

378 

2.30 
2.24 
2.22 

2.19 
2.19 
2.19 

2.19 
2.19 
2.24 

2.25 
2.31 
2.49 

2.25 

33.8 

32.7 
35.8 

35.6 
36.5 
36.9 

38.2 
39.1 
37.5 

39.6 
38.7 
39.0 

443 

2.86 
2.96 
3.42 

3.51 
3.55 
3.55 

3.57 
3.57 
3.57 

3.57 
3.56 
3.50 

3.44 

*  Monthly  figures  for  1914  anfl  1915  aie  approximate. 


TREND   OF  PRODUCTION 


255 


MILLIONS    OF 

BARRELS   AND 

CENTS   PER   BBL. 

600 


presented  in  Fig.  121,  in  which  the  items  named  are  plotted  by  years 
on  semi-logarithmic 
paper,  and  straight 
lines  fitted  to  the 
three  curves  to  in- 
dicate the  average 
trends.  The  data 
on  which  Fig.  121 
is  based,  together 
with  corresponding 
index  numbers,  ap- 
pear in  Table  113. 
It  will  be  observed 
that  the  average 
annual  increase 
over  the  past  eight 
years  has  been  ap- 
proximately 9.5  per 
cent  for  production, 
12  per  cent  for  con- 
sumption, and  22 
per  cent  for  price. 
It  will  be  noted, 
further,  that  in 
1920,  as  compared 
with  1919,  pro- 
duction increased 
17  per  cent;   consumption,  27  per  cent;  and  price,  53  per  cent. 

Table  113. — Trend  of  Production,  Consumption  and  Average  Price  op 
Crude  Petroleum  in  the  United  States  by  Years,  1913-1920 


lOO 
90 


,.M 

COh  SUNlPTipN^^'^<(^^|v) 

UCTION 

t 

^ 

^^ 

-^^^ 

"^" 

/ 

PI 

S^ 

1 
1 

/#" 

\ 

1 

y 

V 

1 

> 

f 

1914 

1915 

1916 

1917 

1918 

1919 

1920 

Fi(i.   121. — Trend  of  production,  consumption,  and  price 
of  crude  petroleum,  1913-1920. 


Year 

Production, 

Millions  of 

Barrels 

Con- 
sumption, 
Millions  of 
Barrels 

Average 

Price, 

Dollars  per 

Barrel 

Production, 
Index  Nos. 

Con- 
sumption, 
Index  Nos. 

Average 

Price, 

Index  Nos. 

1913 

248 

262 

1   14 

100 

100 

100 

1914 

266 

261 

.93 

107 

100 

82 

191.5 

281 

273 

.7.5 

113 

104 

66 

191G 

301 

319 

1..33 

121 

122 

117 

1917 

33.5 

378 

1.77 

1.3.5 

144 

1.5.5 

19  IS 

.3.56 

413 

2.22 

144 

1.58 

19.5 

1919 

378 

418 

2.2.5 

1.52 

160 

197 

1920 

443 

.531 

3.44 

179 

202 

302 

256 


RELATION    BETWEEN    PRICE    AND    PRODUCTION 


Relation  of  Production  and  Price  by  Months. — The  relationships 
shown  in  Fig.  121  are  analyzed  in  greater  detail  in  Fig.  122,  in  which 
the  data  given  in  Table  112  are  plotted  on  semi-logarithmic  paper, 
with  the  trend  lines  as  determined  in  Fig.  121  superimposed  upon  the 
curves.     The  trend  lines  show  a  reasonably  satisfactory  fit  and  indi- 


4bU 
400 

1 

' 

J^ 

t—t 

— 

ibU 

.Pf^ 

ODUCTION 

(UN  TS 

OF 

100,000 

3BLS.) 

:?£^ 

^Z. 

-"i 

iUU 
250 

f 

H 

V^ 

- 

-U 

kfi 

Sb— 

/= 

-^ 

^ 

■^ 

v- 

-^ 

V 

,-^ 

JN 

.  0 

■   9. 

5* 

[Tm^re^s' 

^ 

V 

,- 

" 

'^ 

<'- 

—  ' 

-^ 

200 
150 

100 

w 

PRICE 

(c 

1 
ENTS   PER   BA 

iRE 

:1 

'jL 

■^ 

._ 

^- 

— 

x^ 

:   1 

i^ 

^ 

jM; 

^ 

Bt. 

^ 

V 

^' 

t 

d^"*^ 

t 

yu 

, 

^ 

,' 

au 

— ' 

^ 

1 

60 

50 

-— ' 

■' 

-^. 

>' 

19 

13 

19 

14 

19 

15 

19 

16 

19 

17 

1918 

1919 

1920 

Fig.  122. — Relation  of  price  to  production  of  crude  petroleum  by  months, 

1913-1920. 

cate  that  price,  in  general,  has  increased  at  double  the  rate  character- 
izing the  increase  in  production.  If  the  trend  lines  are  looked  upon 
as  representative  of  the  normal  progression  of  the  items,  the  wave- 
like advance  of  the  price  curve  will  claim  attention — the  reaction 
to  the  Gushing  overproduction,  the  rebound  from  the  price  recovery 
of  1915-1916,  the  1919  reflection  of  the  post-war  adjustment  and  the 


CAV 

.    PRICE  FOR   1913 

= 

1001 

INDEX 

400 

30O 

^ 

-" 

^ 

250 

y^ 

-- 

r 

\ 

150 
100 

^ 

/■ 

-J 

:- 

^ 

its' 

— .- 

~ 

AL 

-  C 

)M^ 

lOD 

TIE 

^ 

- 

^ 

/ 

A 

CR 

JOE 

PE 

r.RC 

LE 

IM 

, 

*— ' 

^"'^l  *— i 

"^  ^ 

y 

j~»-j 

) 

' 

/ 

70 
60 
50 

— 

,'' 

V 

__ 

/ 

'—V- 

19 

13 

IS 

14 

19 

15 

19 

16 

19 

17 

19 

IS 

19 

19 

19 

20 

1 

Fig.  123. — Relation  of  price  level  of  crude  petroleum  to  average  of  all  commodities 
by  months,  1913-1920. 

flush  production  of  North  Texas,  and  the  sharp  rise  of  1920  followed 
by  a  less  marked  increase  in  production. 

Comparison  of  Price  of  Petroleum  with  all  Commodities. — The 
rise  in  price  of  crude  petroleum  over  the  period  shown  is  due  to  a  grow- 
ing demand,  an  increasing  cost  of  exploitation,  and  a  general  advance 
in  the  country's  price-level.     The  last-named  factor  may  be  measured 


SECULAR  TREND   OF   PRODUCTION 


257 


by  plotting  index  numbers  calculated  from  the  average  price  of  crude 
petroleum  against  index  numbers  representing  the  average  whole- 
sale price  of  all  commodities  as  determined  by  the  U.  S.  Bureau  of 
Labor  Statistics.  These  two  items  are  shown  in  comparative  form 
on  a  semi-logarithmic  scale  in  Fig.  123.  Two  features  are  outstand- 
ing: The  several  price  reactions  which  temporarily  depressed  the 
price  of  crude  petroleum  below  the  level  of  all  commodities;  and  the 
sharp  rise  in  the  price  of  petroleum  above  all  commodities  in  1920. 

The  trend  of  the  price  relationship  between  petroleum  and  all 
commodities  may  be  more  strikingly  shown  by  plotting  the  average 


INDEX 
80 

70 

60 

50 

40 

30 

20 

10 

0 

10 


1U 
105 


n 

/ 

/ 

\ 

/ 

r 

7 

:^ 

fT. 

J 

-A 

1 

LE 

VEL 

OF 

A 

L  t 

OM 

ilOt 

IITI 

;s 

- 

- 

- 

1 

J 

■V 

A/" 

\r 

/ 

1 

/ 

\ 

A. 

p 

PF 

:  OF  c 

TROLE 

lUD 

JM 

■ 

, 

1 

\ 

^ 

V   , 

/ 

\ 

V 

^ 

\ 



■^ 

V 

V 

J 

V 

V 

V 

19 

13 

19 

14 

19 

15 

19 

6 

19 

17 

19 

18 

19 

19 

19 

20 

FiCj.  124. — The  average  price  of  crude  petroleum  plotted  as  ordiiiates  of  the  price 
level  of  all  commodities,  by  months,  1913-1920. 


price  of  petroleum  against  the  price-level  of  all  commodities  taken  as 
a  horizontal  line.  This  method  of  plotting  accentuates  the  degree 
to  which  the  price  of  crude  petroleum  departed  from  the  countiy's 
price  level  in  1920  and  serves  to  explain  in  part  the  recession  in  crude 
petroleum  prices  that  came  in  early  1921.     (See  Fig.  124.) 

Secular  Trend  of  Production. — There  are  two  simple  methods  of 
interi)reting  the  trend  of  a  series  of  items,  such  as  production  or  price. 
The  first  methotl  is  that  of  plotting  the  series  on  semi-logarithmic 
paper  and  fitting  a  straight  line  to  the  curve.  This  method,  of  course, 
interprets  the  trend  as  a  geometric  progression  (see  Figs.  121  and  122). 
A  second  method  is  that  of  plotting  the  series  on  a  natural  scale  and 


258 


RELATION    BETWEEN    PRICE    AND    PKODUCTION 


fitting  a  straight  line  to  the  curve;  in  this  instance,  however,  the 
trend  Hne  represents  an  arithmetic  progression  in  which  the  growth 
is  by  addition  instead  of  by  percentage  increase.  Fig.  125  shows  the 
production  of  crude  petroleum  interpreted  by  the  second  method,  in 
which  the  line  of  secular  trend  represents  a  monthly  increment  of 
179  thousand  barrels.  Fig.  125  emphasizes  to  a  greater  degree  than 
does  Fig.  122  the  1920  rise  of  production  above  the  hne  of  "normal" 
trend. 

Secular  Trend  of  Price. — In  Fig.  126  the  price  trend  of  crude 
petroleum  is  also  interpreted  in  the  manner  described  in  the  pre- 
ceding paragraph.     Figs.  125  and  126  should  be  carefully  compared. 


MILLIONS 
OF 

J 

~ 

1 

r~ 

BARFIELS 

aM 

39 
38 

A 

' 

/ 

' 

is/ 

35 

"^ 

/^ 

k 

^ 

/  ^ 

31 
30 

l\ 

^^ 

. 

/s 

'\ 

fV 

J 

r 

\ 

J^ 

^ 

28 

A 

1 

V 

'-'j 

f 

\ 

w^ 

\  / 

1 

A- 

\ 

k' 

Y 

/    \M 

\, 

\     / 

./^ 

fy 

1  V 

\ 

V 

H 

23 
22 

V 

\\ 

■^ 

< 

\ 

/^ 

t\ 

M 

^ 

-^ 

r    '^ 

r 

\ 

X, 

V 

^^ 

19 

3 

19 

14 

19 

15 

19 

16 

19 

17 

19 

18 

19 

19 

19 

20 

Fig.  12.5. — Monthly  production  of  crude  petroleum  in  the  United  States,  1913- 
1920,  together  -with,  line  of  secular  trend  representing  the  "normal"  rate 
of  increase. 


as  they  illustrate  the  price-production  relationship  on  the  assumption 
that  the  increases  in  each  item  are  arithmetic. 

Correction  of  Curves. — If  the  two  lines  of  secular  trend  appearing 
respectively  in  Figs.  125  and  126  be  regarded  as  the  normal  tendency 
of  production  and  price  during  the  period  under  study,  the  deviations 
from  these  lines  in  each  instance  will  presumably  reflect  transient  or 
new  factors  entering  into  the  relationship.  A  comparison  of  the 
deviations  from  secular  trend  is  therefore  suggested.  The  data 
underlying  the  two  curves  are  consequently  recalculated  so  as  to 
show  only  the  deviations  from  secular  trend,  the  data  for  production 
being  still  further  corrected  for  seasonal  variations,  and  the  results 
plotted  in  Fig.  127.     Roughly  speaking,  Fig.  127  eliminates  the  sys- 


EXPLANATION  OF  CURVE  CORRECTION 


259 


tematic  upward  trend  in  production  and  price,  and  shows  niereh-  the 
fluctuations  from  normal. 

The  plot  of  the  corrected  curves  illustrated  in  Fig.  127  shows  a 
wide  divergence  between  production  and  price  in  1915,  following  the 
flush  production  of  the  Gushing  Pool;  a  resonably  good  coincidence 
in  1916,  1917,  and  1918,  especially  in  the  latter  two  years;  a  comple- 
mentary spread  in  the  latter  half  of  1919,  resulting  mainly  from  the 
flush  production  in  North  Texas;  and  an  upwaj-d  divergence  in  1920, 
with  price  rising  roughly  to  three  times  the  level  of  production.  The 
chart  is  thought  to  represent  an  accurate  measure  of  the  extent  to 


325 
300 
275 
250 
225 

r 

I 

1 

^ 

/ 

^ 

^ 

_(^ 

L 

< 

^ 

1 

J 

V 

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y* 

200 
175 

150 
125 
100 
75 
50 
25 
0 

A 

:^ 

^ 

/ 

^ 

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V 

\ 

i 

/ 

/ 

"^ 

\ 

^ 

^ 

1 

^ 

J 

\ 

>^ 

^ 

f 

^ 

^ 

^ 

\- 

-\ 

^ 

J 

/ 

^ 

L 

19 

13 

IS 

14 

19 

15 

19 

16 

19 

17 

19 

18 

19 

19 

19 

20 

Fig.  12G. — Monthlj'  average  price  of  crude  petroleum  in  the  United  States, 
1913-1920,  together  with  the  hne  of  secular  trend  representing  the  "normal" 
rate  of  increase. 

which  the  production  of  crude  petroleum  was  overstimulated  b}'  the 
unduly  sharp  price  rise  in  the  first  quarter  of  1920,  and  to  rather 
clearly  forecast  the  conditions  of  oversupply  that  characterized 
the  closing  months  of  the  year  and  led  to  the  price  cuts  that  started 
in  December  and  became  prominent  early  in  1921. 

Explanation  of  Method  of  Curve  Correction. — The  method  fol- 
lowed in  the  preceding  section  was  suggested  by  a  number  of  inves- 
tigations conducted  by  the  Harvard  University  Committee  on  Eco- 
nomic Research  under  the  editorship  of  Warren  M.  Persons.^     The 

'See  especially:  An  Index  of  General  Busines.s  Conditions,  The  Review 
of  Economic  Statistics,    April,    1919;     Indices   of   Business   Conditions,    Ibid., 


260 


RELATION    BETWEEN    PRICE    AND    PRODUCTION 


calculations  involved  are  rather  lengthy  and,  for  want  of  space,  are 
not  given  here. 

The  seasonal  variation  in  the  production  of  crude  petroleum 
determined  by  the  method  followed  by  the  Harvard  University 
Committee  on  Economic  Research,  is  shown  below,  as  this  factor 
may  be  of  general  use  in  correcting  monthly  production  figures. 
As  is  obvious,  production  fluctuates  according  to  the  number  of 


INDEX 

50 

40 
30 

20 


20 


^ 

f 

\ 

X 

-,^ 

^ 

n 

4 

J 

\ 

/n/ 

\j 

^ 

\ 

J 

y^ 

V 

•v 

J 

- 

- 

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1  f\ 

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PR 

JOUOTI 

1 

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iy- 

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v.. 

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V/ 

V 

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f 

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, 

L-i 

RIC 

\ 

V 

^ 

.;' 

•/ 

\ 

s 

\ 

J 

19 

13 

19 

14 

19 

5 

19 

16 

19 

17 

19 

13 

19 

19 

1920 

Fig.  127. — Production  and  average  price  of  crude  petroleum  in  the  United  States 
by  months,  1913-1920,  corrected  so  as  to  show  the  deviations  from  the 
"normal"  rate  of  increase. 

days  in  the  months,  and  is  relatively  more  vigorous  in  the  warm 
months  than  in  the  winter.  Calculations  based  on  monthly  data  for 
the  eight-year  period,  1913-1920,  yield  the  following  index  numbers 
representing  the  average  variations  of  seasonal  origin: 

Table  114. — Index  Numbers  Showing  the  Seasonal  Variations  in  the 
Production  of  Crude  Petroleum,  Based  on  the  Years,  1913-1920 


January 

February 

March 

April 

99.1 

91.3 

102.4 

99.8 
102.0 
101.9 

July 

105.1 

103.7 

98.7 

101.6 
96.5 
98.2 

100 

August 

September 

October 

November 

December 

Average.  .  . 

May 

June 

January,  1919;     E.  E.  Day,  An  Index  of  the  Physical  Volume  of  Production, 
ibid.,  September,  October,  November  and  December,  1920. 


COMPARISON   OF   CORRECTED   CURVES   BY   YEARS        261 

Comparison  of  Corrected  Curves  by  Years. — In  order  to  concen- 
trate the  results  given  above,  with  a  view  to  eliminating  all  details, 
the  yearly  production,  consumption,  and  price  of  crude  petroleum 
for  the  period  1913-1920  were  recalculated  and  the  secular  trend 
removed.     The  results  were  then  plotted  in  Fig.  128,  which  shows  the 


Fig.  128. — Production,  consumption,  and  average  price  of  crude  petroleum  in 
the  United  States  by  years,  1913-1920,  corrected  so  as  to  show  the  deviations 
from  the  "normal"  rate  of  increase. 

relative  fluctuations  of  the  three  items  from  normal.  While  a  math- 
ematical treatment  of  this  land  must  be  interpreted  with  caution,  the 
chart  would  tend  to  indicate  that  in  1920  price  advanced  30  per  cent 
higher  than  was  necessary  and  led  to  a  production  of  some  35  milhon 
barrels  of  crude  oil  in  excess  of  the  quantity  actually  needed. 


CHAPTER  XIX 

THE  BEARING  OF  AUTOMOTIVE  TRANSPORTATION  UPON 
THE  OIL  INDUSTRY 

There  is  no  industrial  parallel  to  the  growth  in  output  of  pas- 
senger cars,  trucks  and  tractors  in  the  United  States  during  the  past 
ten  years.  The  expansion  of  automotive  transportation  is  one  of 
the  remarkable  features  of  the  twentieth  century.  The  number  of 
cars,  trucks  and  tractors  produced  annually  in  the  United  States 
from  1910  to  1920  is  shown  in  Table  115. 

The  approximate  number  of  motor  vehicles  (passenger  cars  and 
trucks)  registered  during  each  year  from  1912  to  1920  is  shown  in 
tabular  and  graphic  form,  according  to  states,  in  Fig.  129.  Unfor- 
tunately the  passenger  cars  and  trucks  are  not  separately  registered 
in  many  of  the  states,  nor  is  there  any  accurate  inventor3'  of  the 
number  of  tractors  in  operation,  but  a  rough  apportionment  of  the 
automotive  units  into  passenger  cars,  trucks,  and  tractors  may  be 
made  on  the  basis  of  the  production  figures  and  such  registration 
data  as  are  available.  The  results  of  such  a  division  are  given  in 
Fig.  130,  together  with  the  production  figures,  the  chart  therefore 
being  an  approximate  measure  of  the  remarkably  rapid  development 
of  the  automotive  field.  In  rough  terms,  automotive  transportation 
has  grown  at  a  rate  of  40  per  cent  a  year  over  the  past  decade.  The 
sudden  rise  of  such  a  factor  has  exercised  a  profoimd  effect  upon  the 
petroleum  industiy. 

Rapid  Diversion  of  Oil  Products  into  Automotive  Channels. — 
Automotive  transportation,  of  c(jurse,  depends  u])()n  the  oil  inckistry 
for  its  supply  of  fuel  and  of  lubricants.  The  growth  in  deinuinl  for 
these  products  caused  by  the  expansion  of  automotive  transp(jrtation 
has  rapidly  encroached  upon  the  supply  of  oil  products  until  in  1920 
approximately  25  per  cent  by  volume  and  49  per  cent  by  value  of  the 
output  of  the  American  oil  industry'  was  diverted  into  automotive 
channels.  In  the  past  ten  years  the  quantity  of  fuel  and  luV)ricants 
annually  consumed  by  automotive  transportation  in  this  countiy 
has  increased  from  3  million  barrels  to  approximately  100  million 
barrels;  while  during  the  same  period  the  value  of  the  oil  products 
consumed   each  year  ])y  automotive  transportation   has  advanced 

262 


MAJOR  FINANCIAL  RETURNS 


263 


from  9  million  dollars  to  approximately  1  billion  dollars.  To  such 
an  extent  has  the  oil  industry  come  to  be  the  support  of  automotive 
transportation.  Fig.  131  shows  the  rapid  encroachment  of  automotive 
requirements  upon  the  output  of  the  oil  industry. 


I 


Motor  Vehicle  Registration  1912  to  1920 

1912  1913  1914  1915  1915  1917  1918  1919  1920 

Alabama      3,385  5,-135  8,078  11,925  21,636  32,873  46,17V  68,898  74.637 

Arizona      1,624  3.098  5,040  7,318  12,124  19.890  23.905  28,979  34.559 

Arkansas     2.250  3,000  5.642  8,021  15.000  28,693  41.4S8  49.450  59.082 

California      88,699  60,000  123.516  163.795  232.440  306,919  364.800  477.450  568,892 

Colorado     8.950  13.135  17.756  27.568  43.296  66.850  83,630  104.865  128,951 

Connecticut      24,101  27,189  33,009  43.985  61,855  85,724  92,605  109,651  119,134 

Delaware     1,732  2,350  3,050  4.657  7,102  10,700  12.955  16.152  18,300 

DIst.  of  Col 1,732  2.373  4,833  8,009  13,118  15.493  30,490  35,400  9,712 

Florida     1,749  2,372  3,368  10,850  20,713  27.000  54,188  55,400  •73.914 

Georgia      19,120  18.500  20.916  25,671  47.579  70,357  99.800  127,326  144,422 

Idaho     2.500  2,173  3,346  7.071  12,999  24.731  32,239  42.220  60,87S 

llllnola    68.073  94.656  131.140  130,832  248.429  340,292  389,620  478.438  568.754 

Indiana     64,334  47.000  66,400  96.915  139.317  192.192  227,160  277.255  332,707 

Iowa       47.188  75.088  112.134  152.134  193.602  254,317  278,313  363,867  437.300 

Kansas     22.000  34.366  49.374  72.520  112.122  159.343  189.163  227,752  265.396 

Kentucky      5,147  7,210  11.746  19,500  31.700  47.416  65,870  90,841  112.(585 

Louisiana     7,000  7,200  12.000  11.380  17.000  28,394  40.000  51,000  66.000 

Maine      7,743  10.570  15.700  21,545  30,972  41.499  40.372  S3.425  62,907 

Maryland    10,487  14,254  20.213  31.047  44,245  60.943  74,666  95.634  •116.341 

Massachusetts    ..  50.132  62.660  77,246  102.633  136.809  174,274  193,497  2*7.183  304.631 

Michigan     39,579  54,366  76,389  114.845  160.052  247,006  262,125  325,813  412.71' 

Minnesota     29,000  37,800  67.862  93,269  46,000  54,009  204.458  259,743  65,517 

Mississippi     2,895  3,000  5.964  9.669  25,000  36,600  48.400  45.030  63.484 

Missouri     24.379  38.140  54.468  76,462  103.587  147,523  183.040  244,363  296.919 

Montana     2,000  5,686  10,172  14.499  24,440  42,696  61.037  55.325  60,646 

Nebraska     33,861  25,617  40.S29  59.140  100.534  148.101  175.409  192.000  223.000 

Nevada       900  1.131  1.487  2.009  4.919  7.160  8.159  9.305  10,464 

New      Hampshiro  6,764  7,420  9,571  13.449  17.508  22,267  24.817  31,625  34.cfl0 

New     Jersey...  43.056  48,892  60,247  78,232  104.341  134,964  155.519  190,873  227,737 

New    Mexico    911  1,721  2.945  5.100  8,228  8.457  15.000  18.077  22.109 

New    York    .,.  107.262  134.405  169.966  234.032  317,866  411.567  463,758  571,66?     669,290 

North     Carolina..  6,178  10,000  14,677  21,000  33.904  55,950  72.313  109,017  140.360 

North     Dakota     . .  8.997  13,075  15.701  24,908  40.446  62.993  71.627  82  885  90,840 

Ohio    ■...    63,066  86.054  122,504  181.332  252.431  346,772  412.775  511.031  615.397 

Oklahoma      ....  6.524  7,934  13,500  25.032  52,718  100.199  121,500  144,500  204,300 

Oregon 10.165  13.957  16.447  23.585  33,917  48,632  63,324  83.332  103,790 

Pennsylvania     ..  59.357  76.178  112.854  160.137  230,578  325.153  394,189  482,117  570.164 

Rhode     Island 8.565  10.294  12.331  16.362  21,406  37.046  36.218  44.833  50,375 

South     Carolina  10,000  11  500  14  500  15  000  19  000  39,527  55.492  70,143  92,819 

South     Dakota,  14.481  14.578  20,929  28,784  44,271  67,158  90,521  104.628  120,396 

Tennessee     35,187  54.362  19,769  7.618  30.000  48.000  63.000  80,422  101,852 

Texas        35,187  54,362  64,732  90,000  197,687  213,334  251.118  331,310  427.693 

Utah              2.576  4.021  2  253  9,177  13,507  24.076  32.273  35.236  42,578 

Vermont       .  4  283  5  913          8.256  11,499  15,671  20,369  22,655  26,807        31.625 

Virginia        5.760  9,022  14.002  21.357  35.426  55,000  72  228  94.120  134  000 

Washington    ...  13.990  24.178  30,253  38,823  60.734  91.337  117.278  148.775  •173,920 

W      Virginia     ...  5.349  5,088  6.159  13,279  20,571  31.300  38.750  50,203  78.862 

Wisconsin      24.578  34,646  53.161  79.791  115.637  164.531  196,844  236.981  293.298 

Wyoming     1,300  1,584  2.428  3,976  7,125  12,523  16,200  21,371  23. 92^ 

Totals 1,033.096  1.287,&5fl  1.768.720  2.479.742  3.584.567  4,992,152  6.105.974  7.596.503  8,932.458 


•Estli 


ated. 


II 


iMl 


LEGEND 

WW  CARS  REGISTERED  IN  1920 
l^^^^-l  CARS  REGISTERED  IN  1919 
I  I  CARS  REGISTERED  IN  1918 

tTTTi  CARS  REGISTERED  IN  1917 


m 


.liij: 


600,000 


500,000 


400,000 


300,000 


200.000 


100,000 


50.000 


id^li 


o  a  >  <  ^-  z « ui  5  g  5  5  -:  J  ^;  E  kS  ^  ^  a  o 

<U.£l£3Z<>SzOZO' 


Fig.    129.— Motor   vehicles   in   the   United   States   by   years,    1912-1920;    after 
.Vutoniotivo  Indu.stries. 


Major  Financial  Returns  from  Automotive  Requirements.^At 

the  present  time  Mi)pi()xhuiitely  one-hull"  of  the  revenue  of  the  average 
oil  company  is  derivetl  from  the  sales  of  products  going  into  automo- 
tive transportation.     This  proportion,  however,  is  increasing,  since 


264     THE    BEARING    OF    AUTOMOTIVE    TRANSPORTATION 

automotive  requirements  are  expanding  at  a  greater  rate  than 
counter-demands,  with  the  result  that  a  rapidly  growing  encroach- 
ment upon  the  remaining  50  per  cent  is  coming  into  e\ddence. 


SCALE   OF 
INCRBASe  OR 
DECREASE 
+  IOO58 
+  80 
+  60 
+  40 
J+  20 


10 

20 

J-  30 

40 

50 


1911         1912      1913      1914       1915       1916       1917     1918       1919      1920     1921 

Fig.  130. — The  growth  of  automotive  transportation  by  years,  1910-192(3. 


Future  Demands  of  Automotive  Transportation. — The  1910-1920 
rate  of  growth  of  automotive  transportation  which  approximated 
40  per  cent  per  year  represents  a  rapidity  of  growth  that  can  not 
be  expected  to  continue  unabated;  a  careful  inspection  of  Fig.  130, 
indeed,  reveals  the  tendency  of  the  trend  lines  to  modify  their  slopes 


VALUE 


CONSUMED   BY 

ALL   OTHER 
REQUiREMENTS 


FUTURE  DEMANDS  OF  AUTOMOTIVE  TRANSPORTATION      265 

toward  the  end  of  the  decade  represented.  A  careful  analysis  of 
the  factors  entering  into  the  growth  of  automotive  transportation, 
however,       suggests      that 

,  .,      ^.  ,  ,  QUANTITY 

while  the  exuoerant  expan- 
sion characteristic  of  the 
past  decade  will  undoubt- 
edly become  more  temper- 
ate, a  substantial  and  con- 
tinuous growth  may  be  ex- 
pected, barring  the  inability 
of  the  petroleum  industry 
to  maintain  a  supply  of 
motor-fuel  and  lubricants 
at  a  favorable  price.  Refer- 
ence to  Fig.  130  will  bring 
out  the  fact  that  as  the  rate 
of  expansion  of  passenger 
cars  begins  to  taper  off,  the 
growth  of  motor  trucks 
comes  forward  as  a  sup- 
porting factor;  and  as 
the  expansion  in  this  field 
begins  to  moderate,  the 
growth  of  tractors  comes  into  prominence. 


CONSUMED   BY 

AUTOMOTIVE 
TRANSPORTATION 


Fig.  131. — Quantity  and  value  of  petroleum 
products  consumed  by  automotive  transpor- 
tation compared  with  the  consumption  by  all 
other  requirements  in  1920. 


Table  115. — Puoduction  of  Cars,  Trucks  and  Tractors  in  the  United  States 

BY  Years,  1910-1920 

(/«  thousands) 


Year 

Passenger  Cars  * 

Trucks  * 

Tractors 

1910 

181 

6 

4.5 

1911 

199 

11 

7.4 

1912 

356 

22 

11.4 

1913 

462 

24 

7.4 

1914 

544 

25 

10.4 

1915 

819 

74 

22 

1916 

1494 

90 

28 

1917 

1741 

128 

63 

1918 

926 

227 

135 

1919 

1658 

316 

175 

1920 

1883 

322 

200 

*  Data  from  National  Automobile  Chamber  of  C'oiiiinercc. 


266     THE    BEARING    OF    AUTOMOTIVE    TRANSPORTATION 


EFFECT   UPON   GASOLINE  267 

The  approach  of  passenger  cars  to  a  number  representing  the  sat- 
uration point  of  the  country  does  not  therefore  mean  a  hmitation 
to  the  whole  field  of  automotive  transportation.  The  growth  of 
truck  haulage  has  no  such  saturation  point.  With  a  bountiful  and 
cheap  supply  of  fuel  the  motor  truck  can  expand  to  a  further  degree, 
finally  enlarging  its  scope  of  activity  from  the  field  which  character- 
izes it  at  the  present  to  a  point  of  coordination  with  railway  trans- 
portation which  will  make  it  an  integral  part  of  that  countrj^wide 
system. 

Tractors  likewise  occupy  a  field  which  is  in  its  infancy.  Mechan- 
ical tillage  and  mechanical  work  on  the  farm  represent  the  only 
solution  in  sight  for  the  growing  food  requirements  of  a  large  popu- 
lation and  for  the  steady  migration  of  labor  from  rural  districts  to 
industrial  centers.  The  aeroplane  also  is  a  type  of  automotive 
transportation  whose  future  would  appear  to  be  important  should 
no  limitation  of  fuel  supply  intervene. 

On  the  whole,  the  future  demands  of  automotive  transportation 
appear  to  be  insatiable.  The  requirements  of  this  field  present  to 
the  oil  industrj^  an  opportunity  and  an  obligation  which  cannot  be 
exaggerated.  Automotive  demands  will  either  make  the  oil  industry 
greater  than  it  is  at  present,  or  they  will  place  a  burden  upon  the 
oil  industry  which  it  cannot  support. 

Effect  of  Automotive  Requirements  upon  Oil  Products. — Already 
the  rapid  growth  of  automotive  requirements  has  had  a  far-reaching 
effect  upon  the  character  and  volume  of  products  turned  out  by  the 
oil  industry.  Gasoline  has  been  changed  from  a  minor  to  a  major 
product.  Kerosene  has  been  raised  in  price,  and  gas  oil  is  in  course 
of  diversion  from  the  open  market.  Fuel  oil  has  been  seriously  cut 
into,  and  the  supply  of  lubricating  oils,  especially  those  of  heavier 
body,  has  been  heavily  burdened.  These  may  be  regarded  as  the 
initial  elTects  that  automotive  transportation  may  be  expected  to 
exert  in  growing  degree  upon  the  oil  industry.  It  maj'^  be  worth 
while  to  review  these  consequences  in  somewhat  greater  detail. 

Effect  upon  Gasoline. — Once  a  reject  in  connection  with  the 
manufacture  of  kerosene,  gasoline  in  the  aggregate  is  now  the  most 
profitable  product  turned  out  by  the  oil  industiy.  In  the  past  ten 
years  its  output  has  grown  from  a  quantity  representing  scarcely  6 
per  cent  of  the  crude  oil  consumed  in  the  United  States  to  a  present 
volume  which  represents  22  per  cent.  The  mounting  demand  for 
gasoline  has  not  only  stimulated  the  output  of  crude  petroleum,  but 
has  also  dictated  refineiy  expansion  and  changes  in  refinery  technique 
until  now  it  not  only  involves  practically  all  of  the  natural  gasoline 
extracted  from  the  crude  petroleum,  but  draws  upon  outside  sources 


268     THE    BEARING    OF    AUTOMOTIVE    TRANSPORTATION 


EFFECT  UPON   KEROSENE  269 

of  gasoline  such  as  that  won  from  natural  gas.  In  the  past  few 
years  also,  cracking  processes  of  distillation  have  been  developed 
and  changes  in  the  character  of  the  gasoline  supply  to  the  inclu- 
sion of  material  once  marketed  as  light  kerosene  have  come  into  play. 
In  addition  blends  of  gasoline  and  naphtha  with  benzol  and  alcohol 
are  coming  on  the  market,  thus  indicating  the  opportunity  for  incre- 
ments to  the  gasoline  supply  from  extraneous  chemical  sources. 
All  of  these  factors  are  the  direct  resultant  of  the  growth  of  automotive 
transportation.  Without  a  rapidly  increasing  demand  for  gasoline, 
these  changes  would  not  have  become  necessary  and  would  not  have 
appeared. 

Efifect  upon  Kerosene. — Once  the  major  product  of  the  oil  industry 
both  in  volume  and  value,  kerosene  has  been  subordinated  to  a 
secondaiy  position.  In  spite  of  a  growing  consumption  of  crude 
petroleum  the  output  of  kerosene  has  remained  nearly  stationary, 
the  potential  increase  going  instead  into  the  production  of  gasoline. 
The  supply  of  kerosene  also,  once  largely  confined  to  hghting  and 
heating,  is  now  undergoing  encroachment  by  the  internal  combustion 
engine.  Considerable  quantities  of  kerosene  are  used  in  stationary 
engines,  boats  and  tractors.  The  domestic  market  for  kerosene  has 
thus  come  Hrgely  to  lose  its  former  seasonal  character.  The  peak  of 
the  kerosene  demand  has  been  lost  in  the  leveling  effect  of  auto- 
motive requirements. 

Efifect  upon  Gas  and  Fuel  Oil. — The  mounting  requirements  for 
gasoline  have  forced  the  expansion  of  cracking  processes  of  distillation 
using  gas  oil  to  such  an  extent  that  the  supply  of  this  product,  once 
catering  dominantly  to  the  manufacture  of  city  gas,  has  become  insuf- 
ficient for  meeting  the  combined  demand  and  a  serious  shortage 
of  gas  oil  is  under  development.  This  latent  stringency  may  be 
expected  to  increase  until  the  gas  industry  is  forced  to  adapt  its 
practice  either  to  get  along  without  gas  oil,  or  as  a  temporary  expe- 
dient to  make  use  of  the  heavier  varieties  of  fuel  oil.  A  continued 
growth  of  cracking  is  to  be  expected,  and  this  expansion  will  not 
only  quickly  preempt  the  available  gas  oil  but  will  gradually  encroach 
upon  the  whole  fuel  oil  supply  to  such  an  extent  as  to  curtail  many 
of  the  industrial  and  transportation  demands  now  dependent  upon 
this  product. 

Effect  upon  Lubricants. — The  requirements  of  automotive  trans- 
portation have  injected  a  new  and  rapidly  growing  demand  into  the 
countiy's  output  of  lubricating  oils.  While  crude  petroleum  is 
produced  in  excess  of  lubricating  needs,  expansion  in  the  production 
of  lubricating  oils  is  predicated  upon  extensive  changes  in  refineiy 
equipment.     During  the  past  few  years,  the  addition  of  automotive 


270     THE    BEARING    OF    AUTOMOTIVE    TRANSPORTATION 

requirements  to  the  normal  industrial  demand  has  expanded  the 
need  for  lubricants  beyond  the  capacity  of  the  types  of  crudes 
formerl}^  regarded  as  essential  to  the  manufacture  of  the  best 
products,  with  the  result  that  growing  emphasis  is  falling  upon 
the  asphaltic  crudes  which  in  the  early  days  of  refining  were  not 
regarded  as  suitable  raw  material  for  the  fabrication  of  lubricants. 
During  the  early  part  of  1920,  the  rapid  growth  of  the  automotive 
demand  resulted  in  a  shortage  of  the  heavier-bodied  lubricating  oils 
such  as  enter  significantly  into  the  make-up  of  motor-oils.  These 
effects  in  the  long  run  may  l^e  expected  to  continue  and  to  have  still 
further  influence  upon  refinery  technique  and  upon  trade  practice 
in  respect  to  compounding  the  oils  employed. 

Creation  of  a  Motor-fuel  Problem. — The  growth  of  automotive 
requirements  in  excess  of  a  corresponding  rate  of  expansion  on  the 
part  of  the  oil  industry  has  created  a  maladjustment  between  the 
motor-fuel  supply  and  the  average  automotive  equipment  for  hand- 
ling the  fuel.  In  an  attempt  to  maintain  sufficient  gasoline,  the 
character  of  the  gasoline  has  been  permitted  to  change  until  now  it  is 
somewhat  less  adapted  to  the  engine  than  was  once  the  case.  This 
lack  of  balance  between  engine  and  fuel  has  created  a  problem  which 
is  receiving  the  active  attention  of  the  automotive  industry  and 
constitutes  a  field  of  growing  importance.  It  is  rapidly  coming  to 
be  evident  that  increasing  difficulty  will  be  met  in  maintaining  the 
supply  of  motor-fuel  without  a  greater  degree  of  correlation  between 
the  fuel  and  the  engine  than  has  yet  been  attained.  The  accomplish- 
ment of  a  parallel  development  of  fuel  and  engine  to  the  maximum 
easement  of  the  fuel  supply  constitutes  in  simplest  terms  the  motor- 
fuel  problem. 

Creation  of  a  Dilution  Problem. — The  rapid  growth  of  automotive 
requirements  in  respect  to  gasoline,  entailing  a  physical  change  in 
the  character  of  the  latter,  has  had  a  secondary  effect  upon  the  lubri- 
cating oil  used  in  the  internal  combustion  engine.  The  heavy  ends 
of  the  gasoline,  increasing  in  quantity  as  the  volatility  of  the  com- 
mercial supply  of  gasoline  decreased,  have  tended  more  and  more  to 
pass  through  the  automotive  apparatus  incompletely  burned  and  to 
dilute  the  crank-case  oil,  with  serious  effects  upon  the  efficiency  and 
the  life  of  the  engine.  This  outcome  has  brought  sharply  to  the  fore 
the  necessity  of  regarding  motor-oil  and  motor-fuel  as  comple- 
mentary products,  each  to  be  adapted  to  the  character  of  the  other, 
and  the  two  to  be  coordinated  with  the  engine  type.  This  matter 
offers  an  opportunity  for  constructive  work  of  importance. 

Creation  of  a  Peak-load  Problem. — The  growing  demand  for 
gasoline  has  been  complicated  by   the  seasonal  character  of  the 


CREATION    OF   A    PEAK-LOAD    PROBLEM  271 

re(jiiirc'nK>iils.  As  is  well  known,  the  quantity  of  gasoline  needed 
for  the  months  of  July  and  August  is  roughly  twiec  the  reciuirenient 
of  a  similar  period  during  the  winter.  With  the  growth  of  the  gaso- 
line demand  from  year  to  year  the  peak  load  has  become  more  and 
more  accentuated.  A  shortage  in  supply  will  make  its  first  appear- 
ance as  a  stress  at  the  peak  season.  Under  such  conditions,  the 
free  operation  of  the  law  of  supply  and  demand  will  dictate  price 
advances  for  the  purpose  of  allocating  the  inadequate  supply.  And 
gasoline  touches  the  interests  of  so  many  individuals  that  sharp 
price  increases  accompanying  a  shortage  are  likely  to  bring  on  popular 
disapproval  and  govermriental  investigation,  with  the  possibility  of 
official  restrictions  and  regulations.  Hence  counter-methods  of 
cooperative  allocation  in  the  place  of  price  allocation  may  come  under 
consideration,  in  an  attempt  to  avoid  the  results  of  governmental 
action. 

The  Oil  Industry  Becoming  a  Transportation  Industry. — The  out- 
standing characteristic  of  the  oil  industry  is  its  rapid  and  inevitable 
drift  toward  the, status  of  a  transportation  industry,  with  all  the 
public  service  obligations  and  restrictions  that  this  term  implies. 
The  problem  faced  by  the  oil  industry  in  this  respect  is  a  difficult  one. 
The  industry  has  inherently  assumed  responsibility  for  maintaining 
the  supply  of  motor-fuel.  This  supply  in  all  probability,  however, 
cannot  be  maintained  in  requisite  degree,  so  insatiable  are  the 
demands  of  automotive  transportation.  As  a  result,  a  motor-fuel 
shortage  and  a  consequent  price  reaction  become  an  ultimate  event- 
uality, with  all  the  possibilities  that  may  grow  out  of  that  circum- 
stance. 


CHAPTER  XX 

THE  ECONOMIC  SIGNIFICANCE  OF  CRACKING 

,  Nature  of  Cracking. — It  has  long  been  known  that  when  sub- 
jected to  high  temperatures  the  heavier  components  of  crude  petro- 
leum break  down  or  crack  into  lighter  compounds.  Thus,  distilla- 
tion processes,  early  in  the  development  of  oil  refining,  were  so 
adjusted  that  the  hot  vapors  fell  back  into  the  still,  whereupon  some 
decomposition  would  ensue,  leading  to  an  enlarged  output  of  kero- 
sene and  gasoline.  Such  processes,  however,  increased  the  refineiy 
losses  and  were  so  destructive  of  the  lubricating  components  that 
they  were  found  inexpedient  in  refineries  intent  upon  producing 
lubricating  oils  in  maximum  output  and  of  superior  quality. 

The  desire  to  offset  the  lessened  yield  of  gasoline  and  kerosene 
incidental  to  lubricating  output  was  one  of  the  incentives  that  led 
to  the  development  of  independent  cracking  processes  which  could 
be  applied  after  the  initial  separation  of  the  components  had  taken 
place.  This  is  the  type  of  cracking  that  has  outstanding  significance 
under  present  conditions.  Cracking  during  the  initial  distillation, 
though  still  widespread  in  refinery  practice,  is  due  to  pass  as  refiner}^ 
equipment  is  converted  more  and  more  to  lubricating  plants  making  a 
full  extraction  of  values.  At  the  same  time  cracldng  as  an  inde- 
pendent process,  applied  to  one  or  more  of  the  distillates  obtained 
from  the  initial  process  of  distillation,  is  on  the  increase  stimulated 
by  the  growing  demands  for  gasoline. 

Cracking  Processes. — A  large  number  of  cracking  processes  have 
been  devised,  but  few  have  attained  commercial  success;  and  only 
one,  the  Burton  process,  controlled  I)}'  the  Standard  Oil  Company  of 
Indiana,  has  thus  far  made  large  contributions  to  the  gasoline  supply. 
The  principles  of  the  important  processes  are  roughly  the  same — 
distillate  fuel  oil  of  a  not  too  heayv'  character  (gas  oil)  is  subjected  to 
special  treatment  under  the  influence  of  heat  and  pressure  by  means 
of  which  it  is  broken  down  or  cracked  into  gasoline  and  a  residual 
fuel  oil,  with  the  incidental  formation  of  some  carbon. 

While  high  efficiency  is  often  claimed  for  cracking  processes,  the 
current  commercial  practice  yields  gasoline  on  an  average  of  only 
about  30  to  40  per  cent  of  the  original  material  subjected  to  the 

272 


RAW   MATERIAL  FOR  CRACKING  273 

process.  Thus  100  gallons  of  gas  oil  ordinarily  produce  30  to  40 
gallons  of  gasoline,  the  remainder  being  left  in  the  form  of  residuum 
available  as  fuel,  and  coke  which  must  be  removed  periodically'  from 
the  apparatus  at  considerable  expense. 

The  cost  of  cracking  is  not  publicly  known,  but  the  inference  may 
be  drawn  from  such  information  as  is  available  that  gas  oil  may  be 
profitably  cracked  so  long  as  its  market  price  does  not  exceed  roughly 
two-fifths  to  one-haK  the  price  of  gasohne.  Thus,  with  gasohne 
selling  at  30  cents,  it  would  be  profitable  to  crack  gas  oil  if  the  latter 
does  not  bring  over  12  to  15  cents  for  other  purposes.  For  the  city- 
gas  industry  to  secure  a  supply  of  gas  oil,  for  example,  it  must  com- 
pete with  the  cost  relation  just  noted  and  be  prepared  to  pay  more 
than  the  value  of  the  oil  as  a  raw  material  for  cracking.  But  effective 
competition  in  this  direction  would  curtail  the  output  of  gasohne 
and  result  in  a  rising  price  for  the  latter  which  again  would  place 
the  price  of  gas  oil  on  a  higher  level.  The  mere  fact  that  motor-fuel 
represents  an  economic  requu-ement  of  higher  rank  than  the  demand 
for  gas  oil  for  purposes  of  enriching  city-gas,  indicates  that  cracking 
will  not  be  effectively  retarded  by  the  claims  of  the  gas  industry  upon 
this  raw  material. 

Raw  Material  for  Cracking. — Cracking  is  successfully  conducted 
in  practice  by  utilizing  only  the  lighter  varieties  of  distillate  fuel  oil 
(gas  oil)  as  raw  material.  The  reason  for  this  preference  is  that  as 
fuel  oil  increases  in  density,  or  weight,  the  ratio  of  carbon  to  hydrogen 
in  its  components  also  becomes  greater,  and  larger  losses  and  rela- 
tively smaller  yields  are  obtained  in  proportion  as  the  raw  material 
is  richer  in  carbon.  Thus  as  cracking  is  applied  to  successively 
denser  types  of  fuel  oil  a  critical  point  is  reached  at  which  cracking 
becomes  commercially  impracticable,  irrespective  of  the  efficiency  of 
the  process;  and  beyond  which  the  manufacture  of  gasoline  from 
such  raw  material  can  be  accomplished  only  by  a  process  of  hydro- 
genation,  or  hydrogen-adding.  The  position  of  such  a  point  is  hard 
to  determine  accurately,  especially  as  it  may  be  shifted  slightly  by 
technical  and  economic  changes  in  the  cracking  situation ;  but  it  is  a 
fair  assumption  that  it  divides  the  country's  supply  of  fuel  oil  into 
two  portions,  of  which  the  larger  includes  the  heav^'  fuel  oils  unsuited 
for  cracking. 

The  heavier  varieties  of  fuel  oil  (including  residuum),  which  far 
outweigh  in  volume  the  lighter  distillate  fuel  oils,  have  not  therefore 
lent  themselves  to  effective  or  profitable  cracking.  Some  additions 
to  the  country's  supply  of  light  distillate  fuel  oil  will  come  through 
changes  in  refinery  practice,  especially  as  skimming  plants  develop 
into  complete-run  refineries;    but  significant  additions  on  this  score 


274  THE  ECONOMIC  SIGNIFICANCE  OF  CRACKING 

cannot  arrive  rapidh'.  On  the  whole,  the  rigorous  requirements 
of  cracking  processes  in  respect  to  raw  material  put  a  serious  brake 
upon  the  rapidity  with  which  the  output  of  cracked  gasoline  can 
increase,  and  set  an  ultimate  limit  far  short  of  the  point  at  which 
the  total  fuel-oil  supply  of  the  country  would  be  involved  in  the 
process.  Under  present  practice,  it  will  be  scarcely  possible,  I'oughly 
speaking,  for  cracking  to  involve  more  than  half  of  the  fuel-oil  supply 
and  to  yield  cracked  gasoline  in  excess  of  25  per  cent  of  the  total 
quantity  of  fuel  oil  produced. 

It  is  apparent,  then,  that  as  the  output  of  cracked  gasoline 
increases,  more  and  more  of  the  lighter  varieties  of  fuel  oil  will  ])c 
diverted  from  their  present  uses  until  only  the  heavy  fuel  oils  will  be 
left  to  meet  the  normal  commercial  demands  for  this  product. 

Residuum  from  Cracking. — A  significant  factor  in  the  growth  of 
cracking  is  found  in  the  high  proportion  of  the  raw  material  which  is 
not  converted  into  gasoline  and  hence  is  thrown  back  into  the  fuel- 
oil  supply  as  an  uncrackable  residuum.  The  volume  of  this  residuum 
increases  in  direct  proportion  to  the  quantity  of  cracked  gasoline 
produced,  and  hence  as  cracking  eats  into  the  fuel-oil  supply  on  the 
one  hand,  a  greater  volume  of  residuum  accumulates  on  the  other; 
therefore  the  fuel-oil  resen^e  of  the  country  is  encroached  upon  by 
cracking  at  more  than  double  the  rate  ordinaril}^  taken  into  account. 
Fig.  135  illustrates  this  point  and  indicates  how'  quickly,  irrespective 
of  the  quantity  of  fuel  oil  available,  the  potentiality  of  cracking  may 
be  realized. 

Relation  of  Cracking  to  the  Gasoline  Supply. — The  demand  for 
gasoline  is  growing  faster  than  the  supply  of  crude  petroleum,  and 
since  1917  the  quantity  of  gasoline  produced  in  this  country  has 
exceeded  by  a  widening  margin  the  quantity  of  natural  gasoline  con- 
tained in  the  crude  petroleum  consumed.  (See  Fig.  134.)  Although 
casing-head  gasoline  and  a  change  in  the  average  quality  of  com- 
mercial gasoline  to  include  some  of  the  lighter  kerosene  cuts  have 
augmented  the  supply  of  gasoline,  the  main  increment  to  the  normal 
quantity  is  now  the  contribution  from  cracking  stills.  A  rough  view 
of  the  growth  of  the  various  components  entering  into  the  gasoline 
supply  is  shown  in  Fig.  52,  page  116. 

Natural  Gasoline. — The  potential  supply  of  natural  gasoline  has 
been  calculated  from  the  character  and  output  of  the  crude  petro- 
leum produced  in  the  various  states  and  imported,  and  the  results 
are  plotted  in  Fig.  134  against  the  actual  production  of  gasoline.  The 
chart  shows  clearly  that  up  to  1917  more  natural  gasoline  was  present 
in  the  crude  petroleum  consumed  than  was  necessary-  to  meet  gasoline 
requirements,   whereas   after   that  year  supplementaiy   sources  of 


NATURAL  GASOLINE 


275 


gasoline  were  necessary  to  fill  the  demand.  The  chart  also 
out  the  important  part  played  by  the  high-gasoline  crudes 
North  Texas  field  in  1919-1920.  Projecting  forward  the  data 
especially  in  the  light  of  the  growing  importance  of  low-g 


1900 


1905 


1910 


1915 


1920 


l)rings 

of  the 

shown, 

asoline 

MILLIONS 

OF 
BARRELS 


B 


10 
5 

O 
120 


Fk;.  134. — Chart  showing  the  natural-gasoline  content  of  the  crude  petroleum 
annually  produced  in  the  United  States  by  fields  and  imported  during  the 
period,  1900-1920. 

crudes,  it  would  appear  that  the  available  natural  gasoline  will  show 
a  slowing  rate  of  increase  in  the  face  of  an  accelerating  demand. 
This  tendency  will  increase  the  burden  falling  upon  cracking  and 
create  a  gasoline  shortage  in  the  failure  of  cracking  to  expand  with 
sufficient  rapidity.  Fig.  134  will  repay  careful  consideration,  as  it 
dissects  and  measures  the  trend  of  the  component  parts  of  the  largest 
contributor  to  the  gasoline  supply. 


276  THE  ECONOMIC  SIGNIFICANCE  OF  CRACKING 

Casing-head  Gasoline. — A  significant  production  of  a  highly 
volatile  gasoline,  called  casing-head  gasohne,  is  won  from  natural  gas. 
This  relatively'  new  source  of  supply  has  made  important  contribu- 
tions, approximating  in  1920  about  one-tenth  of  the  total  output  of 
gasoline,  and  having  an  added  importance  as  a  blending  agent 
facilitating  the  employment  of  light  kerosene  as  motor-fuel.  As  to 
the  future,  a  careful  appraisal  of  the  casing-head  gasohne  industry 
indicates  that  while  in  absolute  terms  the  output  of  this  product  will 
probably  increase,  its  ratio  to  the  total  production  of  gasoline  of  all 
types  cannot  be  expected  to  become  greater.  Hence,  casing-head 
gasohne  has  already  exerted  its  maximum  effect  upon  the  gasoline 
situation,  and  may  be  accredited  with  no  added  importance  in 
appraising  the  broad  developments  ahead. 

End-point  of  Gasoline. — Since  1915,  especially,  the  volatility  of 
gasoline  the  countiy  over,  while  showing  minor  fluctuations,  has 
steadily  decreased.  Expressed  in  terms  of  the  boiling  point  of  the 
heaviest  fraction — technically  called  the  end-point — this  statement  is 
equivalent  to  saying  that  the  end-point  of  gasoline  since  1915  has 
notably  risen.  This  again  is  equal  to  stating  that  a  considerable 
quantity  of  light  kerosene  according  to  1915  standards  now  goes  into 
the  supply  of  gasohne,  constituting  the  high  boihng-point  fractions, 
or  "  hea'vy  ends,"  of  the  latter  and  causing  the  present  high  end- 
point.  The  average  end-point  of  the  countrv^'s  supply  of  gasoline, 
according  to  recent  motor-gasoline  surveys  conducted  by  the  Bureau 
of  Mines,  was  417°  F.  in  April,  1919;  427°  F.  in  January-,  1920; 
456°  F.  in  July,   1920;  and  429°  F.  in  January^  1921. 

The  advance  in  end-point  of  gasoline  is  an  indication  that  the 
demand  for  this  product  is  exceeding  the  combined  efforts  of  natural 
gasohne,  casing-head  gasoline,  and  cracked  gasoline  to  meet  require- 
ments. The  only  handicap  to  a  continued  advance  in  end-point  is 
the  inability  of  existing  internal  combustion  engines  to  utilize  effi- 
ciently the  heavy  portions  of  such  products.  A  significant  ten- 
dency toward  engine  adaptations  in  this  direction,  however,  is  coming 
intx)  being;  and  the  gasoline  situation  will  be  considerably  influ- 
enced by  the  extent  and  rapidity  with  which  automotive  equipment 
becomes  capable  of  handling  heavier  and  less  volatile  motor- 
fuels. 

The  course  of  ■  automotive  developments,  in  consequence,  will 
have  a  bearing  upon  cracking;  and  should  automotive  equipment 
come  to  a  point  of  independence  in  respect  to  the  volatility  of  the 
fuel  which  it  consumes,  cracking  will  no  longer  be  necessary  and  will 
decline.  The  possibility  of  this  eventuality  must  be  borne  in  mind  in 
appraising  the  future  of  cracking. 


APPRAISAL  OF  THE   FUTURE 


277 


Appraisal  of  the  Future. — An  attempt  to  reduce  to  a  quantitative 
basis  the  Hne  of  reasoning  given  above  is  shown  in  Fig.  135,  which 
traces  the  factors  involved  through  the  past  ten  j^ears  on  the  basis  of 


actual  statistics  and  ])roj('('ts  the  i^robable  course  of  events  to  the 
end  of  1925. 

Fig.  135  shows  the  consumption  of  crude  petroleum  in  the  United 
States  during  the  period  1910-1925  (estimated  of  course  for  1921- 
1925)  divided  broadly  into  the  fuel  and  non-fuel  components,  kero- 


278  THE  ECONOMIC  SIGNIFICANCE  OF  CRACKING 

sene  being  left  as  intermediate  or  neutral  ground  which  may  swing 
either  way.  The  ]^r()jec'ted  course  of  crud(^  consumption  is  of  course 
hypothetical,  althougli  leased  on  a  careful  analysis  of  the  situation; 
but  the  point  should  be  emphasized  that  the  validity  of  the  chart 
does  not  depend  upon  the  accmiicy  of  the  jirojected  portion  of  the 
crude  consumption  curve.  .  Large  variations  in  the  latter  may  be 
seen  to  have  a  greatly  minimized  effect  upon  any  component  shown. 

The  chart  represents  fuel  oil  as  a  motor-fuel  reserve  upon  which 
cracking  is  rapidly  encroaching.  This  invasion  will  probably  remove 
gas  oil  from  the  open  market  before  the  end  of  1923,  while  the  supply 
of  potential  gas  oil  will  probal^ly  run  out  (being  entirely  consumed 
for  cracking)  by  the  end  of  1925.  If  this  reasoning  is  essentially 
correct — and  it  will  merely  be  modified,  not  invalidated,  by  unfore- 
seen developments  in  supply — cracking  would  reach  its  maximum 
rate  of  expansion  in  five  years,  slowing  down  after  1925  to  a  rate  of 
growth  parallel  with  the  increase  or  decrease  in  the  quantity  of  crude 
petroleum  made  available  for  consumption.  Such  is  essentially  the 
outside  attainment  that  may  be  expected  from  cracking  in  the  next 
five  years;  as  a  matter  of  fact,  the  growth  of  cracking  is  likely  to  be 
less  than  the  maximum  indicated  on  the  chart,  perhaps  approxi- 
mating the  dotted  fines  passing  through  the  area  marked  "  cracked 
gasoline." 

The  question  therefore  arises  as  to  whether  cracking  can  sustain 
the  supply  of  motor-fuel  in  sufficient  volume  to  support  the  mounting 
requirements  of  automotive  transportation.  The  conclusion  that 
seems  indicated  by  the  analysis  given  is  that  the  supply  maj^  be 
maintained  over  a  few  years,  but  shortly  the  Hmitations  to  cracking 
will  come  into  effect,  and  cracking  unaided  by  other  expedients 
will  l)egin  to  prove  inadequate.  In  this  event,  the  internal  combus- 
tion engine  will  be  gradually  forced  to  fall  back  upon  heavier,  less 
volatile  fuels  than  gasoline,  which  will  set  up  a  counter  demand  for 
the  light  fuel  oils  and  other  distillates  for  admixture  directly  with 
gasoline,  and  thus  cut  into  the  raw  material  for  cracking  at  the  same 
time  that  cracking  is  rendered  progressively  unnecessary'. 


CHAPTER   XXI 

COMPOSITE  MOTOR-FUELS 

In  recent  years  considerable  attention  in  the  automotive  field 
has  been  directed  to  the  relation  existing  between  the  internal  com- 
bustion engine  and  its  fuel.  The  rapid  rise  of  automotive  transpor- 
tation has  led  to  a  country-wide  change  in  the  volatility  of  gasoline, 
which  has  attracted  no  end  of  interest  and  raised  the  problem  of 
better  fitting  the  fuel  to  the  engine,  or  vice  versa,  or  else  striking  a 
compromise  adjustment  between  the  two.^ 

As  the  matter  is  shaping  u]:)  now,  there  are  three  avenues  through 
which  this  adjustment  is  tending  to  come  about: 

(1)  The  production  of  a  growing  quantity  of  synthetic  gasoline 

from  the  heavier  oils,  through  the  so-called  cracking 
processes  of  distillation. 

(2)  Adaptations  on  the  part  of  the  engine  to  acconnnodate  the 

efficient  utilization  of  less  volatile  gasolines  and  heavier 
oils. 

(3)  The  development  of  composite  fuels  or  blends,   which 

permit  the  enlargement  and  possibly  the  improvement 
of  the  fuel  supply,  through  additions  of  material  not 
suitable  or  sufficiently  bountiful  alone  to  be  of  conse- 
quence. 

The  future  of  any  one  of  these  three  expedients  for  furthering 
the  advance  of  automotive  transportation  depends  upon  the  coiu'se 
of  development  in  respect  to  the  other  two,  and  the  final  outcome 
will  be  the  resultant  of  factors  which  cannot  be  wholly  appraised  in 
advance.  Not  the  least  of  these  is  the  extent  to  which  the  whole 
matter  is  brought  under  scientific  control  Ijy  far-sighted  and  con- 
structive efforts  on  the  part  of  the  fuel  and  automotive  industries 
acting  in  common. 

Composite  fuels  are  by  no  means  a  new  element  in  the  fuel  situa- 
tion, even  in  the  United  States.  Indeed,  much  of  the  gasoline  mar- 
keted in  this  country  to-day  is  composed  of  straight-refinery  gasoline 
blended  with  gasoline  made  in  pressure  stills,  or  with  casing-head  gaso- 

•  Pogue,  Composite  Fuels,  Society  of  Automotive  Engineers,  January  7,  1920. 

279 


280  COMPOSITE   MOTOR-FUELS 

line  recovered  from  natural  gas,  together  with  petroleum  distillates 
that  were  formerly  sold  as  naphtha  or  kerosene;  and  even  gasolines 
are  being  modified  through  the  addition  of  benzol.  Casing-head 
blends  alone  have  succeeded  in  adding  about  10  per  cent  to  our  total 
supply  of  engine  fuel.  Composite  fuels,  in  which  not  only  distillates 
of  petroleum  origin  but  benzol,  coal-tar  oils,  alcohol  and  even  other 
chemical  products  play  a  part,  have  of  course  been  long  in  use  in 
Europe,  and  some  of  these  met  with  considerable  expansion  during 
the  war,  especially  in  Germany.  In  the  past  few  years,  fuel  blends 
containing  benzol  or  alcohol  have  also  come  into  qualitative,  if  not 
quantitative,  prominence  in  the  United  States,  thus  drawing  atten- 
tion to  the  poRsiliilities  of  their  future  importance  in  this  countr>\ 

Source  of  Composite  Fuels. — The  resources  in  sight  from  which 
the  components  of  composite  fuels  may  be  drawn  are  mainly  three  in 
number : 

(1)  Crude  petroleum  (ultimately  including  shale  oil). 

(2)  Bituminous  coals,  which  are  capable  of  yielding  tar  oils, 

benzol  products  and  other  hydrocarbons  when  subjected 
to  by-product  distillation. 

(3)  Organic  products  rich  in  sugars,   starches  or  cellulose, 

especially  waste  products  of  organic  origin,  from  which 
oxygenated  hydrocarbons  such  as  alcohols  and  ethers 
can  be  manufactured,  chiefly  through  the  aid  of  bac- 
terial fermentation. 

As  regards  the  quantity  of  raw  material  available,  the  United 
States  is  bountifully  endowed  in  all  three  respects.  Since,  however, 
an  extensive  and  highly  organized  industrial  agency  of  fabrication 
and  distribution  must  stand  between  these  resources  and  the  utiliza- 
tion of  their  fuel  potentialities  for  automotive  power,  the  develop- 
ment of  composite  fuels  becomes  dependent  not  only  upon  the  con- 
ditions controlling  the  growth  of  the  oil-refining  industry,  the  coal- 
refining  industiy,  and  a  group  of  activities  which  may  be  termed  the 
fermentation  industiy,  but  also  upon  the  interplay  between  these 
interrelated  activities. 

The  oil-refining  industiy  is  the  largest,  most  firmly  established 
and  highly  developed  of  the  three,  and  its  capacity  and  industrial 
ability  may  briefly  be  dismissed  as  being  sufficiently  in  mind.  This 
industiy  turns  out  four  products  of  major  importance,  gasoline,  kero- 
sene, fuel  oil  and  lubricating  oil,  not  to  mention  by-products;  and  its 
output  of  gasoline,  in  consequence,  is  intimately  tied  in  with  the 
manufacture  of  joint-products  demanded  by  needs  scarcely  less 
pressing    than    automotive     transportation.     Thus,     gasoline    has 


COAL  PRODUCTS  281 

become  a  commodity  which  must  be  produced,  if  the  market  for 
other  oil  products  is  to  be  supplied ;  while  the  oil  industry  in  addition 
has  established  country-wide  machinery  for  distribution.  These 
economic  facts  have  a  direct  bearing  upon  the  manner  in  which  com- 
posite fuels  can  be  expected  to  develop;  they  make  it  probable  that 
composite  fuels,  if  found  desirable,  will  ultimately  be  purveyed 
dominantly  by  the  oil  industry  rather  than  by  outside  activities, 
under  whatever  auspices  the  initial  developments  take  place  and 
without  any  reference  to  matters  of  financial  control. 

Coal  Products. — The  coal-refining  industry  has  thus  far  been  slow 
of  development  in  the  United  States.  To  date  it  has  succeeded  in 
involving  only  about  one-twelfth  of  the  bituminous  coal  brought 
into  use,  approximately  eleven-twelfths  being  still  consumed  in  the 
raw  state;  the  coke  industry  and  the  artificial-gas  industry  are 
responsible  for  the  advance  noted.  The  production  of  benzol  and 
related  hydrocarbons  is  mainly  dependent  upon  the  progress  attained 
in  coal  refining. 

Up  to  the  present,  most  of  this  progress  has  taken  place  in  the 
coke  industry,  where  by-product  practice  is  gradually  superseding 
the  so-called  beehive  process,  in  which  benzol  and  other  by-products 
are  not  recovered;  benzol  is  now  being  produced  in  connection  with 
about  half  of  the  coke  manufactured  in  this  country.  In  1920  the 
output  of  benzol  from  this  source  was  80  million  gallons.  With 
by-product  practice  throughout  the  coke  industry,  the  output 
would  have  been  but  doubled,  around  3  per  cent  of  the  quantity  of 
gasoline  produced.  The  coke  industry,  therefore,  can  at  best  be 
expected  to  furnish  a  quantity  of  liquid  fuel  wholly  inadequate  to 
have  broad  significance,  except  in  so  far  as  it  may  be  used  as  a  blend- 
ing agent  to  give  desirable  qualities  to  other  liquid  fuels  obtainable  in 
larger  quantities. 

The  artificial-gas  industry  was  responsible  in  1918  for  the  pro- 
duction of  about  4  million  gallons  of  benzol,  recovered  from  gas 
plants  operating  with  by-product  recovery.  The  entire  artificial- 
gas  industry,  however,  consumes  less  than  2  per  cent  of  the  country's 
output  of  bituminous  coal,  and  as  long  as  this  activity  retains  its 
present  stationary  position  the  quantity  of  engine  fuel  to  be  expected 
from  this  source  is  practically  negligible.  There  is  a  possibility, 
however,  that  the  future  will  see  the  upgrowth  of  municipal  fuel 
plants  and  centralized  power  stations,  operating  with  by-product 
recovery,  which  will  give  a  new  source  of  benzol  of  greater  signifi- 
cance than  the  coke  intlustry  in  its  entirety.  But  such  develop- 
ments must  of  necessity  be  slow;  and  should  benzol  eventually  be 
extracted  from  the  bulk  of  our  bituminous  coal,  it  is  evident  that,  on  a 


282  COMPOSITE  MOTOR-FUELS 

basis  of  2  to  3  gallons  per  ton,  the  supply  will  even  then  fall  far  short 
of  a  dominant  position  as  a  source  of  automotive  power. 

During  the  past  few  years,  investigations  by  Kettering  and 
Midgely  in  the  laboratories  of  the  General  Motors  Research  Cor- 
poration on  the  chemical  changes  taking  place  during  combustion, 
have  opened  up  new  and  interesting  possibilities  in  the  direction  of 
increasing  the  efficiency  of  the  petroleum  motor-fuels  by  the  addition 
of  small  quantities  of  appropriate  chemical  substances.  These 
investigations  have  indicated  that  the  tendency  of  the  engine  to 
"  knock  "  when  run  on  fuels  of  low  volatility  arises  from  the  forma- 
tion of  secondary,  detonatable  compounds  which  decompose  with 
explosive  violence  and  cause  an  abnormal  rise  in  pressure.^  This 
tendency  stands  in  the  way  of  further  raising  the  end-point  of  gasoline 
without  at  the  same  time  lowering  the  compression  of  the  engine, 
which  blocks  the  enlargement  of  our  fuel  supply  not  only  by  rendering 
deeper  cuts  into  the  crude  ineffective,  but  also  by  preventing  the 
added  fuel  economy  that  could  be  attained  with  engines  of  higher 
compression.  It  has  been  shown,  however,  that  the  addition  to  the 
fuel  of  small  percentages  of  aniline — a  nitrated  l^enzol — leads  to  even 
combustion  without  detonation,  and  therefore  not  only  improves  the 
performance  of  present-day  high-end-point  fuels,  but  opens  the  pos- 
sibilities of  still  further  raising  the  end-point  and  at  the  same  time 
gaining  additional  efficiency  by  increasing  the  engine  compression. 

This  work  is  of  the  first  importance,  both  by  virtue  of  what  it  is 
actually  accomplishing,  and  in  respect  to  what  it  suggests  as  to  the 
possibilities  of  fabricating  directly  into  the  fuel,  during  the  process 
of  refining,  the  properties  which  would  lead  to  a  more  efficient  utiliza- 
tion in  present  engines  and  eventually  to  the  development  of  more 
efficient  engine  types. 

Alcohol. — The  fermentation  industry,  notably  the  branch  having 
to  do  with  the  manufacture  of  industrial  alcohol,  was  strongly  stim- 
ulated by  the  war,  and  industrial  machineiy  was  developed  for  the 
production  of  considerable  alcohol  for  fuel  purposes.  The  arrival  of 
prohibition  also  freed  a  large  eciuipment  from  other  duties,  which 
might  be  turned  in  part  to  a  similar  purpose.  There  are  serious 
handicaps  of  a  sentimental  nature,  however,  which  tend  to  bind  the 
manufacture  of  industrial  alcohol  with  restrictions  harmful  to 
progress.  Besides  which,  the  industrial  depression  of  1920-1921  has 
retarded  advance  in  this  field. 

^  C.  F.  Kettering,  More  EfFieient  Utilization  of  Fuel,  Jour.  Soc.  Aiit.  Eng,, 
April,  1919;  Consumption,  The  Automotive  Industry,  American  Petroleum 
Institute,  Bull.  132,  Deeember  10,  1920.  The  Midgley  Gas  Engine  Indicator, 
Dayton,  1920. 


ALCOHOL  283 

Alcohol  alone  can  be  used  to  advantage  only  in  engines  especially 
adapted  to  this  fuel,  but  various  mixtures  of  alcohol,  benzol,  gasoline 
or  other  petroleum  distillates,  and  other  materials  have  given  prom- 
ising results.  It  is  of  great  significance  from  an  economic  standpoint 
that  alcohol,  benzol  and  the  lighter  petroleum  distillates  such  as  gaso- 
line and  kerosene  can  readily  be  rendered  miscible.  It  is  probable 
that  alcohol,  like  benzol,  will  not  come  into  widespread  use  as  a  single 
fuel,  but  has  a  broad  significance,  for  the  present  at  least,  only  as  a 
lilending  agent  in  connection  with  liquid  fuels  obtainable  in  larger 
quantities. 

The  quantity  of  alcohol  which  will  be  produced  in  this  country 
in  the  immediate  future  is  nmch  more  difficult  to  foresee  than  in  the 
case  of  benzol.  The  United  States  in  1916,  1917,  and  1918,  turned 
out  about  50  million  gallons  of  denatured  alcohol  each  year,  having 
increased  from  an  output  of  14  millions  in  1915  under  the  stimulus 
of  munitions  requirements.  Much  of  the  industrial  alcohol  under 
manufacture  to-day  is  made  from  sugar  molasses  and  waste  sulphite 
liquor;  while  garbage,  fruit  wastes,  ethylene  from  coal-distillation 
plants,  and  other  materials  may  be  counted  as  supplementary 
resources.  Considerable  interest  has  been  aroused  in  some  quarters 
by  the  possibility  of  installing  individual  manufactories  on  farms 
and  in  various  centers,  making  use  of  plant  wastes;  but  it  is  ques- 
tionable whether  an  extensive  attainment  of  tliis  kind  is  practicable 
and  moreover  the  widespread  production  of  alcohol  would  set  up 
competition  for  products  needed  directly  or  indirectly  for  food. 
While  the  ultimate  alcohol  capacity  of  the  country  cannot  be  closely 
measured,  the  conclusion  seems  warranted  that  for  some  time  to 
come  the  available  supply  will  bear  a  close  quantitative  analogy  to 
benzol,  the  two  combined  bulking  small  when  compared  with  engine- 
fuel  requirements  which  already  approach  5  billion  gallons  per  year. 

On  the  whole,  therefore,  it  would  appear  that  benzol  and  alcohol 
hold  somewhat  analogous  positions  in  respect  to  the  supply  of  motor- 
fuel.  Neither  can  be  produced  in  sufficient  quantities  in  the  near 
future  to  replace  gasoline ;  both  have  interesting  possibilities  in  the 
direction  of  improving  the  character  of  the  fuel  supply.  This  whole 
field  is  undeveloped  and  stands  in  need  of  more  research  attention 
than  has  been  accorded  it. 

Conclusion. — If  found  to  fulfil  their  initial  promise  of  advantage, 
composite  fuels  can  be  developed  Ijy  the  oil  iiulustry,  or  in  a  more 
limited  manner  Ijy  outside  agencies;  but  tliey  can  more  readity  be 
produced  on  a  large  scale  by  the  oil  industiy  because  of  its  control 
of  working  channels  of  distriljution.  The  possibilities  of  improving 
the  supply  of  gasoline  by  chemical  means  are  of  distinct  promise,  and 


284  COMPOSITE  MOTOR-FUELS 

consequently  there  may  come  into  evidence  a  steady  trend  toward  a 
fuel  supply  of  petroleum  origin  carrying  small  quantities  of  other 
materials  which  will  facilitate  utilization  in  present  types  of  engines 
and  at  the  same  time  free  the  development  of  future  engines  from  the 
present  limitations  of  low  compression. 


CHAPTER   XXII 
THE  MOTOR  FUEL  PROBLEM 

One  of  the  most  remarkable  and  significant  developments  of 
modern  times  is  the  sudden  and  spectacular  rise  of  automotive  trans- 
portation. In  scarcely  more  than  two  decades,  the  whole  color  of 
existence  has  been  changed  by  the  automobile,  the  motor-truck,  the 
tractor  and  the  aircraft,  which  have  come  to  be  so  numerous  and 
commonplace  as  to  be  seen  on  eveiy  hand.  Almost  overnight, 
transportation  has  been  freed  from  limitations  of  relative  inflexibiUty, 
and  a  mobile  and  speedy  agency  of  carriage  has  appeared  on  the 
scene  to  open  to  transportation  the  second  and  third  dimensions. 

So  rapid  has  been  the  growth  of  the  automotive  industry  and  of 
the  consequent  demand  for  motor-fuel,  that  the  ability  of  the  fuel 
supply  to  keep  pace  has  come  in  question.  The  supply  of  motor- 
fuel,  indeed,  is  already  showing  the  effects  of  the  tremendous  demand 
bearing  down  upon  it;  and  there  arises,  in  consequence,  a  motor- 
fuel  problem  which  is  commanding  the  serious  attention  of  all  the 
interests  at  stake.  Since  a  fuel  stringency,  or  undue  advance  in 
price,  would  prove  a  retarding  factor  in  the  progress  of  automotive 
transportation,  the  prospect  is  one  of  vital  concern  not  only  to  the 
industrial  activities  involved,  but  to  the  general  public  as  well. 

The  factors  involved  in  this  problem  are  the  demand  for  motor- 
fuel  and  the  adaptability  of  the  internal  combustion  engine,  on  the 
one  hand;  and  the  supply  of  crude  petroleum,  the  motor-fuel  pro- 
ducing capacity  of  this  material,  the  supplemcntaiy  fuel  materials  in 
sight,  and  the  possibilities  of  advantageous  chemical  change  in  the 
fuel  supply,  on  the  other.  Out  of  the  interplay  of  these  factors  will 
come  developments,  focused  in  the  price  of  motor-fuel,  that  will 
determine  the  future  of  automotive  transportation.^ 

The  Demand  for  Motor-fuel. — The  demand  for  gasoline  has 
y3een  increasing  of  recent  years  at  an  imposing  rate.  The  nature  of 
this  expansion  has  been  described  in  Chapter  XIX.  (See  also  Fig. 
57,  p.  124.)  The  projection  of  this  demand  into  the  future  leads 
to  interesting  conclusions. 

^  See  J.  E.  Pogue,  An  Interpretation  of  the  Engine-fuel  Problem,  Society  of 
Automotive  Engineers,  February,  1919. 

285 


286 


THE   MOTOR-FUEL   PP.OBLEM 


The  probable  number  of  motor-vehicles  which  will  be  required 
by  automotive  transportation  in  the  years  immediately  ahead,  if  the 
demand  is  not  curtailed  by  an  inadequate  supply  of  fuel  or  an  undue 
advance  in  its  price,  has  been  calculated  on  the  basis  of  the  trend  of 
population  increase  and  the  assumption  that  the  maximum  ratio  of 
vehicles  to  population  as  found  to-day  in  the  most  prosperous  sections 
will  become  characteristic  of  the  entire  country.  Calculations  for 
passenger  cars  and  trucks,  made  on  this  basis,  b}^  the  Commercial 
Research  Department  of  the  Franklin  Automobile  Company  are 
shown  in  graphic  form  in  Fig.  136.  This  projection  for  cars  and 
trucks,  together  with  the  prospective  number  of  tractors  on  an 
assumed  increase  of  200,000  a  year  (the  number  produced  in  1920), 
is  converted  into  gasoline  and  crude  petroleum  in  Table  116,  on  the 
basis  of  the  present  fuel  consumption  per  unit  and  a  conversion 
factor  of  25  per  cent  representative  of  the  proportion  of  gasoline 
obtained  from  crude  petroleum  under  present  conditions. 

Table  113. — Future  Demand  fou  Gasoline  in  the  United  States  in  1925, 
1930,  1935  AND  1940,  Based  on  Present  Conditions  of  Fuel  Supply 
AND  Future  Number  of  Motor-vehicles  as  Projected  by  P'ranklin 
Automobile  Co. 

(In  millions  of  harieU) 


Year 

Gasoline  Required  by  — 

Gasoline, 

Total 

Requirements 

Equivalent  in  Crude 

Petroleum  on  Basis  of 

25  Per  Cent 

Conversion 

Factor 

Passenger 
,    Cars 

Trucks 

Tractors 

1925 
1930 
1935 
1940 

•  80 

96 

112 

120 

120 
216 
312 
360 

16 

28 
40 
52 

216 
340 
464 
532 

864 
1360 
1856 

2128 

While  the  figures  shown  are  admittedly  excessive  and  to  be 
considerably  discounted,  especially  in  regard  to  trucks,  they  never- 
theless point  to  a  future  motor-fuel  demand  of  stupendous  propor- 
tions. With  an  unmined  reserve  of  crude  petroleum  appraised  at 
6  billion  barrels,  having  an  estimated  gasoHne  content  of  only  1 
billion  barrels,  the  gasoline  demand  as  shown  would  exhaust  the 
entire  domestic  reserve  by  1926,  and  projected  further  would  call 
for  an  annual  share  in  the  world's  outijut  of  crude  petroleum  running 
upward  of  1.300  million  barrels  by  1930  and  exceeding  2  ))illion 
barrels  by  1940.  It  is  evident  that  if  such  a  demand,  even  halved, 
is  to  be  met  by  gasoline  on  the  basis  of  present  engine  types  and 
performance,  the  oil  industry  must    expand  to    proportions  vastly 


THE   DEMAND   FOR   MOTOR-FUEL 


287 


00  10         ■*         CM         O         0)         ffl 

01  01         CM         01         CM         -         - 


*C\IO00(O'*OIO         0310 
CM        0)         OJ 

S310IH3A   UOXOIAI   dO  SNOmiW 


I- 


288  THE   MOTOR-FUEL  PROBLEM 

greater  than  its  present  dimensions  and  find  new  oil  sources  of  suffi- 
cient magnitude  and  accessibility  to  support  this  expansion.  The 
alternative,  aside  from  a  curtailment  of  the  demand,  is  a  change  in 
fuel  and  engine  in  the  direction  of  extracting  a  much  greater  motor- 
fuel  service  from  a  much  smaller  volume  of  raw  material. 

Adaptability  of  the  Internal  Combustion  Engine. — The  automo- 
tive engine  has  developed  and  become  standardized  in  its  main 
features  on  the  basis  of  cheap  and  volatile  gasoline.  Its  improve- 
ment has  for  the  most  part  followed  the  direction  of  convenience 
and  performance,  with  secondaiy  consideration  to  fuel  economy. 
This  trend  has  been  sustained  to  the  present  time  by  the  existence 
of  a  highly  stimulated  oil  production,  providing,  until  lately,  gasoline 
capacity  in  excess  of  gasoline  demand.  So  long  as  this  condition 
obtained,  there  was  no  need  apparent  for  the  automotive  industiy 
to  concern  itself  with  considerations  of  fuel  supply,  but  now,  with  the 
gasoline  capacity  of  the  country'  beginning  to  give  indications  of 
strain,  while  the  motor-fuel  demand  is  just  fairly  getting  launched, 
the  question  arises  whether  the  exigencies  of  the  future  will  allow  the 
engine  tj'pe  continued  freedom  of  development  in  luxury'  directions, 
or  wiU  force  adaptations  to  meet  the  exactions  of  the  fuel  situation. 

Automotive  .apparatus  is  mechanically  responsive  to  changing 
requirements,  but  its  adaptation  to  new  conditions  is  retarded  by  the 
time  required  to  perfect  mechanical  developments  and  the  counter 
advantages  to  be  gained  from  quantity  production  and  standardiza- 
tion, with  their  resistance  to  change.  So  far-reaching  and  insistent, 
indeed,  are  the  claims  in  favor  of  holding  fast  to  established  standards, 
that  departures  can  be  made  only  at  great  cost  and  in  response  to 
powerful  reasons.  Anticipatory  action  becomes  peculiarly  difficult 
in  the  face  of  these  circumstances.  Recognizing  the  strength  of  the 
factor  opposing  changes  in  engine  type  and  seeking  to  force  the  fuel 
supply  into  channels  fitting  the  established  standards,  we  may 
examine  the  fuel  supply  with  a  view  to  determining  if  present  engine 
practice  can  be  advantageously  maintained,  and,  if  not,  along  what 
lines  changes  are  likely  to  be  made. 

The  Supply  of  Motor-fuel. — The  motor-fuel  in  dominant  use  in 
the  United  States  is  gasoline,  a  mixture  of  volatile  hydrocarbons  won 
from  crude  petroleum  by  processes  of  distillation.  Kerosene,  fuel 
oil,  lubricating  oils,  and  various  by-products  are  produced  at  the 
same  time,  and  bear  an  intimate  relation  to  gasoline,  in  respect  both 
to  price  and  the  relative  quantities  produced.  The  output  of  these 
products  in  1920  is  shown  in  Table  117. 

The  countr\''s  supply  of  gasoline  depends  upon  the  output  of 
domestic   petroleum   and   the  gasoline-producing   capacity   of   this 


THE   SUPPLY  OF   MOTOR-FUEL 


289 


material,  the  quantity  of  foreign  petroleum  made  available  through 
importation,  and  the  extent  to  which  supplemental  means  for  expand- 
ing the  supply  are  developed. 


Table  117. — Production  of  Petroleum  Products  in  the  United  States  in 

1920 


(Data  from  U.  S.  Bureau  of  Mines) 


~I 


Product 


Millions  of  Barrels 

Per  Cent 

116.2 

24.5 

55.2 

11.7 

211.3 

44.6 

24.9 

5.3 

47.7 

10.0 

18.7 

3.9 

Gasoline 

Kerosene 

Gas  and  fuel  oil 

Lubricating  oils 

All  others 

Losses 

Total.  .  . 


474.0 


100.0 


The  Supply  of  Domestic  Petroleum. — The  supply  of  crude  petro- 
leum available  in  this  country  depends  upon  the  urmiined  reserve 
and  the  rate  at  which  it  may  be  won.  The  petroleum  resource  in 
the  United  States  has  been  inventoried  by  the  U.  S.  Geological 
Survey  in  1908,  1916,  and  1918;^  each  time  in  greater  detail.  The 
results  obtained  are  highly  significant,  especially  as  regards  the 
meagerness  of  the  reserve,  which  approximates  6  billion  barrels  when 
adjusted  for  Jan.  1,  1921  (see  Fig.  137),  and  in  respect  to  the  fact  that 
between  1908  and  1918,  in  spite  of  an  exceedingly  aggressive  cam- 
paign of  exploration,  the  oil  taken  from  the  ground  exceeded  the 
additions  made  to  the  reserve  through  new  discoveries.  Those  who 
count  upon  new  discoveries  to  make  up  for  the  progressive  depletion 
of  the  reserve  overlook  the  fact  that  for  over  ten  years  new  discoveries 
have  been  failing  to  do  so. 

At  the  same  time  the  production  of  crude  petroleum  has  been 
steadily  mounting  to  its  present  enormous  figiu'e,  443  million  barrels 
for  the  year  1920  as  contrasted  with  210  million  barrels  in  1910.  The 
growth  in  output  has  been  sustained,  not  primarily  by  the  discovery 
of  new  oil-fields,  but  largely  by  the  cumulative  tapping  of  an  increas- 
ing number  of  rich  spots  in  inventoried  territoty.  There  is  obviously 
a  limit  to  an  output  supported  by  such  a  train  of  circumstances; 
there  are  strong  engineering  and  economic  reasons  for  believing  that 
the  production  of  crude  iictroleum  in  the  United  States  has  virtually 

*  See  pages  18-21. 


290 


THE   MOTOR-FUEL  PROBLEM 


reached  its  maximum  annuax  rate  iii  192i,  and  that  the  country 
will  thereafter  pass  into  a  period  of  a  dechning  and  more  costly 
production.     ("See  Fig.  4,  page  20.) 

The  Gasoline  Factor. — The  output  of  gasohne  approximates  ^ 
the  production  of  crude  petroleum  multiplied  by  its  commercial- 
gasoline  factor,  which  in  1920  was  21.8  per  cent.-  This  factor,  like 
the  supply  of  crude  petroleum,  is  itself  a  variable  figure  depending 
upon  the  proportion  of  the  crude  supply  subjected  to  refining,  the 
natural  gasoline  content  of  this  quantity,  and  the  extent  to  which 

ORIGINAL  SIZE   OF    PETROLEUM    RESERVE   U.3    BILLION    BARRELS 


■'.'■■ 

-- 

-.. 

1 

J 

VuSED    (5.4    BILLION    BBL3.) 


>UNUSED    (5.9    BILLION    BBLS.) 


1865    1870    1875    1880    1885   1890    1895    1900    1905    1910    1915    1920 

Fig.  137. — The  waning  reserve  of  petrcilcum  in  the  United  States. 

means  are  used  for  forcing  the  gasoline  yield  above  the  natural 
gasoline  content.  Obviously,  as  long  as  the  natural  gasohne  is  not 
fully  extracted  from  the  available  crude,  there  is  scant  economic 
room  for  the  development  of  roundabout,  i.e.,  more  intricate,  more 
costl}'  means  for  producing  gasoline.     This  was  the  situation  that 

'  Because  of  the  subordinate  item  of  the  gasohne  produced  from  natural 
gas,  the  relation  is  not  an  exact  equality. 

-  The  commercial-gasoline  factor  is  here  used  to  designate  the  percentage  of 
gasoline  obtained  from  the  crude  consumed;  the  commercial-gasoline  factor 
should  be  distinguished  from  the  natural-gasoline  factor,  which  represents  the 
percentage  of  natural  gasoline  present  in  the  crude.  The  former  percentage  has 
increased  until  it  has  e.xceeded  the  latter.  The  natural-gasoline  content  of  the 
domestic  production  of  crude  petroleum  in  1920  was  approximately  21.6  per 
cent;  of  the  imported  crude,  approximately  8  per  cent. 


THE  GASOLINE   FACTOR  291 

prevailed  in  the  United  States  until  recently;  tliis  is  why  natural-gas 
gasoline,  cracked  gasoline,  and  low-volatile  gasoline  are  all  recent 
commercial  developments. 

The  proportion  of  the  crude  supi^ly  subjected  to  refining  has. been 
steadily  increasing  until,  in  1920,  of  a  total  consumption  of  531 
million  barrels  of  crude  petroleum  in  the  United  States,  434  barrels 
or  82  per  cent  was  run  to  stills.  While  the  statistics  may  not  indicate 
the  precise  situation  in  this  respect,  the  quantity  not  refined  repre- 
sented in  the  main  heavy,  non-gasoline  crudes  used  directly  for 
fuel  purposes.  Thus  practically  the  whole  suppty  of  crude  has  now 
come  to  be  requisitioned  for  gasoline  production.  This  is  to  say 
that  the  readiest  means  for  increasing  the  supply  of  gasoline,  i.e., 
refining  a  progressively  larger  percentage  of  the  crude  produced, 
has  been  virtually  forced  to  its  limit;  the  "  gasoline  slack  "  within 
the  crude  production  has  been  taken  up.  Thus  the  most  potent 
circumstance  that  has.  thus  far  enabled  the  demand  for  gasoline  to 
increase  without  a  concomitant  increase  in  price  is  no  longer  in 
existence.  Further  expansion  in  gasoline  output  Avill  he  through 
more  difficult  avenues  than  that  of  merely  increasing  refineiy  capacity. 

While  dependent  primarily  upon  the  quantity  of  crude  refined, 
the  output  of  gasoline  is  at  the  same  time  a  function  of  the  average 
composition  of  the  various  crudes  that  go  to  make  up  the  total 
supply.  Since  crude  petroleum  varies  in  its  natural-gasoline  content 
from  about  1|  per  cent  in  the  case  of  heavy,  asphaltic  oils  to  30 
per  cent  or  more  for  light,  paraffin  oils,  it  is  evident  that  the  gasoline 
supply  will  be  strongly  influenced  by  the  dominant  type  of  oil.  As 
the  high-gasoline  crudes  were  the  first  to  be  exploited  in  this  country, 
the  unmined  supply  of  petroleum  has  been  selectively  reduced  in 
gasoline  capacity,  so  that  the  crude  production  of  the  future  will 
show  a  lower  natural-gasoline  factor  than  the  crude  supply  of  the 
past.  While  this  matter  cannot  be  expressed  quantitatively,  in 
very  rough  terms  it  may  be  noted  that  the  high-gasohne  crudes  are 
about  half  exhausted,  while  the  low-gasoline  crudes,  originally  of 
about  equal  magnitude,  are  only  about  a  third  used  up.  In  other 
words,  the  country's  gasoline  capacity  is  being  drawn  upon  more 
rapidly,  and  hence  exhausted  more  quickly,  than  is  indicated  by  the 
condition  of  the  crude  supply  viewed  alone.  This  tendency  was  of 
no  immediate  consequence  so  long  as  it  could  be  compensated  by 
merely  refining  a  greater  proportion  of  the  output  of  crude;  but  now, 
since  practically  all  of  the  domestic  ciiide  is  used  for  gasoline  extrac- 
tion, a  decline  in  gasoline  content  can  be  offset  only  by  shoving  crude 
production  to  a  higher  figure  than  would  otherwise  be  necessarj',  or  else 
through  a  still  greater  use  of  means  for  wresting  an  unnatural  per- 
centage of  gasoline  from  tlie  crude  obtainable. 


292 


THE   MOTOR-FUEL  PROBLEM 


The  estimated  supply  of  natural-gasoline  present  in  the  unmined 
reserve  of  crude  petroleum  is  shown  in  Table  118. 

Table    118. — The   Estimated  Natural-gasoline  Content  of  the  Unmined 
Supply  of  Crude  Petroleum  in  the  United  States  on  January  1,  1921 

(In  millioiia  of  barrels) 


Fields 


Unmined  Supply  of 
Crude  Petroleum 


Estimated  Natural- 
Gasoline  Content 


Appalachian 

Lima-Indiana .... 

Illinois 

Ivansas-Oklahoma 
North  Texas 

North  Louisiana . . 

Gulf  Coast 

Wyoming 

California 

Others 

Total 


491 

33 

152 

146.5 

262 

53 

703 

370 

2043 

3.50 


147 

7 

30 

366 

87 

15 

11 

110 

204 


5922 


1065 


In  respect  to  imported  crudes,  the  natural  gasoline  content  has 
varied  from  virtualty  zero  up  to  a  maximum  of  12  per  cent;  and  the 
bulk  of  tlie  oil  in  sight  in  Mexico,  Central  America,  and  South  Amer- 
ica corresponds  more  closely  to  the  types  already  imported  than  to 
the  high-gasoline  crudes  of  the  Appalachian  and  Mid-Continent 
fields  which  have  been  the  bulwark  of  gasoline  production  in  this 
count  rJ^ 

Enlarging  the  Gasoline  Factor.— The  means  for  producing  more 
gasoline  than  may  Vje  obtained  by  subjecting  the  total  supply  of  crude 
to  straight  refining  are:  (1)  increasing  refineiy  efficiency,  (2)  blending 
high-volatile  natural-gas  gasoline  with  low-volatile  refinery  gasoline, 
naphtha,  and  kerosene,  (3)  extending  the  use  of  cracking  in  refinery 
practice,  and  (4)  lowering  the  volatility  of  gasoline.  All  four  means 
are  increasing  in  use.  For  the  sake  of  brevity  the  first  two  may  be 
passed  over  with  the  comment  that,  while  important,  they  have 
quantitative  limitations  which  prevent  them  from  broadly  affecting 
the  situation.  This  is  not  true  of  the  second  two,  the  limitations 
of  which  are  of  a  different  order. 

Cracking  is  a  process  attachable  to  straight  refining,  by  means  of 
which  low-priced  distillates  such  as  gas-oil  are  rerun  under  more 
rigorous  conditions  and  partly  converted  into  gasoline.  So  far 
cracking  has  operated   commercially  only  upon  distillate  fuel  oil 


itflNLARGING  THE   GASOLINE   FACTOR  293 

and  has  yielded  gasoline  to  the  extent  of  30-40  per  cent  of  the  oil 
treated.  These  conditions  would  appear  to  limit  the  volume  of 
gasoline  ultimately  attainable  by  cracking  to  around  25  per  cent  of 
the  total  supply  of  fuel  oil.  There  is  also  the  element  of  time  to  be 
reckoned  with  before  cracking  could  expand  to  its  limit,  while  counter 
demands  affecting  distillate  fuel  oil  are  arising  which  may  restrict 
the  quantity  available  for  cracking.  The  process,  moreover,  can 
be  profitably  operated  only  so  long  as  a  favorable  differential  exists 
between  the  market  price  of  distillate  fuel  oil  and  the  selling  price  of 
gasoline,  hence  the  growth  of  cracking  to  a  point  restricting  counter 
demands  may  be  expected  to  institute  an  economic  cycle  where 
further  cracking  may  be  realized  only  upon  the  basis  of  higher  levels 
of  pr^ce  for  gasoline.  On  the  whole,  therefore,  it  would  appear  that 
cracking,  while  of  the  utmost  importance  for  the  present,  will  prove 
incapable  of  augmenting  the  gasoline  supply  in  adequate  volume 
with  sufficient  economy  and  celerity  to  sustain  the  future  demands 
of  automotive  transportation. 

The  fourth  means  for  enlarging  the  output  of  gasoline  independ- 
ently of  the  production  of  crude  is  through  lowering  the  volatility 
of  the  product.  The  less  specialized  the  engine  fuel  in  respect  to 
volatility,  the  more  can  be  produced  from  a  given  quantity  of  crude 
by  the  processes  of  refining  in  general  use.  By  a  change  in  character, 
the  supply  of  "  gasoline  "  can  be  enlarged,  slowly  or  rapidly  at  will, 
without  material  refineiy  changes,  until  it  is  two  to  three  tunes  the 
present  figure,  even  with  no  increase  in  the  supply  of  crude.  Since 
the  materials  requisitioned  in  such  a  change  are  the  basis  of  kerosene 
and  fuel  oil,  which  can  be  replaced  almost  entirely  by  coal  and  its 
products,  the  transition  may  be  made  without  a  basic  disturbance  of 
the  countiy's  economic  fabric  and  without  setting  up  counter  forces 
tending  to  turn  back  the  tide.  The  practical  limit  to  this  enlargement, 
however,  is  set  by  what  the  standardized  automotive  engine  will 
accept  in  the  way  of  fuel.  The  progress  of  gasoline  in  this  direction 
has  already  gone  as  far  as  practicable  under  existing  standards.  A 
critical  point  has  been  reached  in  the  end-point  of  gasoline,  where  a 
further  upward  change  will  increase  consumption  more  than  it  would 
increase  production  and  thus  deplete  rather  than  augment  the  total 
available  fuel  supply. ^  If  further  gain  is  to  be  made  here,  therefore, 
either  the  character  of  the  fuel  or  the  engine,  or  both,  must  change. 
If  the  fuel  current  finds  an  unbreakable  dam  at  this  point,  the  whole 
pressure  of  advance  will  be  thrown  back  into  the  channels  already 
reviewed.     But  since  the  past  few  years  have  seen  the  end-point  of 

'  H.  C.  Dickinson  and  S.  W.  Sparrow,  Possible  Fuel  Saving  in  Automotive 
Engines,  American  Petroleum  Institute,  November  17,  1920 


294  THE   MOTOR-FUEL  PROBLEM 

gasoline  steadih'  risitiji,  in  spite  of  uU  opi)ositk)n,  while  the  engine 
equipment  has  already  been  forced  to  make  su])erficial  concessions 
to  this  tendency,  it  is  ai)])arcnl  that  the  cliannels  of  crude  production, 
cracking,  etc.,  have  already  demonstrated  their  incapacity  unaided 
to  accommodate  the  rising  flood  of  gasoline  demand.  If  these  main- 
stays of  automotive  transportation  are  failing  to  meet  the  issue  now, 
it  is  hazardous  to  count  upon  complete  relief  in  that  quarter  when  the 
pressure  focusing  there  is  rapidly  increasing. 

Bearing  of  Foreign  Deposits  upon  the  Situation. — The  limita- 
tion to  the  gasoline  supply  arising  from  the  domestic  production  of 
crude  petrolemn  has  been  generally  recognized,  but  deposits  in 
Mexico  and  other  foreign  regions  are  counted  upon  in  many  quarters 
to  fill  in  the  gap.  It  has  been  showm  elsewhere  (see  Chapter  XXV), 
however,  that  the  proven  oil-pools  of  Mexico,  the  principal  standby, 
are  well-nigh  exhausted,  and  an  interv^al  of  years  must  elapse  before 
the  output  of  that  countiy  can  be  strongly  reinforced  by  newly 
developed  territor>\  Also  the  exploitation  of  other  foreign  deposits 
involves  an  element  of  considerable  time,  not  to  mention  restrictions 
of  a  political  and  financial  character.  (See  Chapter  XXIV.)  More- 
over, much  of  the  prospective  territory  most  convenient  of  access  to 
the  United  States  gives  promise  of  yielding  in  the  main  low-gasoline 
crudes  such  as  those  that  characterize  the  Gulf  Coastal  Plain  of  the 
United  States  and  Mexico. 

On  the  whob,  foreign  deposits  do  not  appear  to  be  capable  of 
compensating  for  the  decline  due  in  domestic  output  and  of  sup- 
porting the  increments  to  demand  as  well,  on  the  basis  of  the  present 
disposition  of  products.  Indeed,  the  richest  known  deposits  of 
Mexico  were  exploited  and  exhausted  before  the  output  could  be 
brought  significantly  into  motor-fuel  production;  and  the  same 
outcome  will  probably  characterize  to  some  degree  the  development 
of  rich  deposits  further  afield.  In  short,  the  demands  concentrating 
ui:)on  crude  petroleum  the  world  over  are  such  that  the  volume  avail- 
able for  consumption  in  the  United  States  can  scarcely  be  ex- 
pected to  continue  to  increase  at  the  rate  characterizing  the  past 
decade. 

Significance  of  Supplementary  Motor-fuels. — The  petroleum 
industry  is  so  firmh*  established  and  produces  such  a  range  of  products 
other  than  gasoline,  that  no  motor-fuel  of  non-petroleum  origin  need 
be  counted  on  as  capable  of  displacing  gasoline.  Substitute  fuels 
are  to  be  regarded  as  supplementary  resouices,  capable  of  affecting 
the  situation  broadly  only  as  petroleum  reUnquishes  the  field  through 
exhaustion. 

There   are   three   supplementaiy   motor-fuels   in   sight — benzol, 


FUEL  AND   ENGINE  ALREADY   CHANGING  295 

alcohol,  and  shale-oil  distillate.^  Benzol  and  alcohol,  in  the  form  of 
appropriate  blends,  are  already  coming  on  the  market  in  small  quan- 
tities; shale-oil  distillate  may  be  expected  to  contribute  only  on  a 
higher  level  of  price  than  at  present  obtains.  As  to  resource  capac- 
ity, benzol  is  a  by-product  of  coal,  and  the  quantity  produced  is 
dependent  upon  the  coal  subjected  to  by-product  distillation;  benzol 
will  be  manufactured  in  constantly  increasing  volume,  but  the  total 
supply,  under  present  technology,  can  never  fill  more  than  a  small 
part  of  the  motor-fuel  requirements.  Alcohol  may  likewise  slowly 
increase  in  volume  but  after  the  utilization  of  a  few  readily  obtainable 
waste  products,  its  manufacture  will  come  into  competition  with 
food  demands  and  hence  meet  a  critical  limitation  in  its  further 
expansion.  Shale-oil  distillate  is  derivable  from  a  resource  prac- 
tically unlimited  in  size,  but  a  large  output  must  wait  upon  the 
upgrowth  of  a  new  industry  in  which  but  the  merest  start  has  been 
made. 

On  the  whole,  supplementary  motor-fuels,  while  of  the  utmost 
eventual  importance  and  deserving  of  the  most  vigorous  development, 
can  scarcely  be  counted  on  to  make  notable  independent  contribu- 
tions to  the  motor-fuel  supply  in  the  immediate  future.  Their  chief 
significance  for  the  present  would  appear  to  lie,  not  in  their  volumetric 
importance,  but  in  their  apparent  ability  to  raise  some  of  the  inter- 
mediate petroleum  distillates  to  motor-fuel  rank  and  improve  the 
operating  efficiency  of  heavy  gasolines  when  appropriately  blended 
with  these  substances. 

Fuel  and  Engine  Already  Changing. — It  is  apparent  from  the 
foregoing  review  that  the  demand  for  motor-fuel  has  ahx^ady  begun 
to  outdistance  the  supply  of  gasoline,  with  the  result  that  the  char- 
acter of  the  fuel  is  changing  and  the  appliance  is  beginning  to  adapt 
itself  to  this  change.  It  is  furthermore  apparent  that  the  demand 
in  the  years  ahead  will  assume  such  tremendous  proportions  in  the 
face  of  a  resource  whose  ultimate  size  is  limited  and  whose  rate  of 
production  is  restricted,  that  motor-fuel  service  can  be  sustained  by 
sheer  volumetric  increases  in  supply  in  still  less  degree  and  additional 
changes  may  be  expected  in  both  the  fuel  and  the  appliance  making 
for  higher  net  efficiency.  It  is  a  fair  assumption  that  the  insistence 
of  the  demand  will  exhaust  all  possiljilities  in  both  engine  and  fuel 
before  a  curtailment  in  automotive  transportation  would  be  accepted. 

Changes  in  the  Appliance. — The  automotive  appliance,  while  a 
triumph  of  engineering  as  regards  simplicity  and  reliability,  leaves 
much  to  be  desired  in  the  wa}'  of  fuel  economy.  Changes  in  the 
appliance  hold  the  possibility  not  only  of  increasing  the  mileage 

1  See  Chapter  XXI  for  a  fuller  discussion  of  supplementary  motor  fuels. 


296  THE   MOTOR-FUEL  PROBLEM 

obtained  but  also  of  permitting  the  physical  suppty  of  fuel  to  be 
enlarged  through  the  inclusion  of  non-volatile  distillates  not  useful 
as  motor-fuel  in  present  engines.  The  possibilities  of  appliance 
change  fall  chiefly  into  four  categories,  some  of  which  involve  coordi- 
nate changes  in  the  fuel  itseK:  (1)  the  distribution  of  the  fuel  to  the 
cylinders  may  be  improved;  (2)  the  combustion  of  the  fuel  in  the 
cyhnders  may  be  made  to  yield  higher  efficiency;  (3)  the  design  of 
the  appliance  may  be  changed  in  the  direction  of  smaller,  lower- 
powered  units,  better  adjustment  of  the  load  factor  through  an  addi- 
tional gear-shift,  and  the  like;  and  (4)  the  engine  type  may  be 
changed  in  favor  of  the  injection  engine,  the  steam  engine,  or  even 
some  other  U-pe  yet  to  be  perfected,  such  as  the  gas  turbine. 

(1)  The  less  volatile  the  fuel,  the  greater  the  difficulty  in  gaining 
proper  vaporization,  even  distribution  to  the  cylinders,  and  no  con- 
densation in  the  cylinders  with  consequent  dilution  of  the  crank-case 
oil.  With  the  rise  in  end-point  already  experienced  with  gasoline, 
the  old  methods  of  distributing  the  fuel  as  a  cold  mixture  have  proved 
inadequate,  and  various  means  have  been  commercially  developed 
to  apply  heat  to  the  charge  in  order  to  improve  its  distribution. 
There  is  considerable  difference  of  opinion  as  to  what  constitutes  the 
best  means  of  preparing  the  fuel  for  the  engine.  The  hot-spot  man- 
ifold concentrating  the  heat  where  the  liquid  strikes  the  walls,  the 
manifold  completely  jacketed  by  the  exhaust  so  that  the  entire  mix- 
ture is  heated,  the  hot-air  stove  which  heats  only  the  air  going  to 
the  carburetor,  methods  for  preparing  "  superheated  "  gas,  and  many 
other  variants  are  all  coming  into  prominence.  All  resources  have 
not  yet  been  exhausted  in  tliis  respect,  and  further  improvements  in 
the  induction  system  and  the  extension  of  these  improvements  to  all 
units  may  be  looked  for. 

Effective  distribution,  however,  while  leading  to  a  more  efficient 
utilization  of  the  fuel,  is  only  one,  and  perhaps  a  minor,  part  of  the 
problem  of  improvement  facing  the  automotive  apphance. 

(2)  A  second  possibility  of  improvement  in  the  appliance  is  the 
matter  of  gaining  greater  efficiencj^  in  combustion.  The  thermal 
efficiency  of  the  carburetion  engine  is  primarily  dependent  upon  the 
compression  ratio.  As  the  gravit}^  of  the  fuel  is  lowered  (or  the 
end-point  raised),  the  compression  of  the  engine  must  be  lowered 
to  prevent  the  phenomenon  of  detonation  called  knocking.  And 
as  the  motor  builder  lowers  the  compression  of  his  engines,  they 
operate  less  efficiently  and  requue  a  greater  quantity  of  fuel  per  mile. 
The  problem  of  raising  the  efficiency  of  combustion,  therefore,  is  not 
entirely  a  mechanical  one;  tliLs  matter  involves  the  chemical  character 
of  the  fuel  quite  as  much  as  it  does  the  mechanical  nature  of  th^ 


CHANGES  IN  THE  APPLIANCE  297 

appliance.  It  can  be  solved  only  by  coordinate  attention  to  fuel  and 
engine.  The  work  of  Kettering  and  Midgley  has  pointed  the  way  to 
changes  that  may  become  effective  in  the  direction  of  adding  certain 
components  to  the  fuel  that  will  permit  its  efficient  employment  in 
engines  of  higher  compression  than  prevalent  to-day.  The  same 
means  will  also  allow  a  larger  proportion  of  the  crude  to  be  effectively 
employed  in  engines  of  present-day  compressions  pending  the  more 
fundamental  change. 

(.3)  Aside  from  the  improvements  in  the  distribution  and  com- 
bustion of  the  fuel,  mechanical  changes  are  possible  in  other  respects 
that  would  greatly  increase  the  mileage  per  gallon  of  fuel.  In  the 
first  place,  the  employment  of  exceedingly  high-powered  cars  could 
be  curtailed;  but  this  is  a  minor  matter  compared  with  the  fact  that 
all  cars  are  adjusted  to  carry  a  peak  load  of  performance  far  in 
excess  of  normal  running  requirements.  And  this  extra  ability, 
called  into  use  only  now  and  then,  is  paid  for  by  an  increased  con- 
sumption of  gasoline  whenever  the  car  is  running.  In  other  words, 
the  average  car  runs  at  its  maximum  efficiency  only  at  full  load 
with  open  throttle;  under  these  conditions  the  car  may  attain  a 
thermal  efficiency  of  20-25  per  cent.  But  under  ordinary  road  con- 
ditions the  car  is  running  most  of  the  time  at  part  load,  and  the 
efficiency  drops  very  rapidly  as  the  load  is  reduced.  The  operating 
efficienc}^  of  the  typical  car,  therefore,  is  only  around  5-10  per  cent, 
from  a  quarter  to  a  third  of  its  maximum.  By  making  smaller, 
lower-powered  motors,  some  of  the  luxury  qualities  of  the  present 
automobile  would  be  sacrificed,  but  a  considerable  gain  in  fuel 
economy  would  be  attained. 

Even  with  cars  as  they  are  to-day,  a  fuel  loss  running  upwards  of 
25  per  cent  results  from  improper  carburetor  adjustment  leading 
to  the  employment  of  an  over-rich  mixture.  Experiments  on  exhaust 
gases  conducted  by  the  U.  S.  Bureau  of  Mines,^  in  connection  with  the 
ventilation  of  the  Hudson  River  Vehicular  Tunnel,  have  demon- 
strated that  the  combustible  gas  in  the  average  automobile  exhaust 
contains  nearly  30  per  cent  of  the  total  heat  in  the  original  gasoline. 
Careful  carburetor  adjustment  should  result  in  saving  half  of  this 
quantity.  The  great  majority  of  passenger  cars  and  trucks  are 
operated  on  rich  mixtures  suitable  for  maximum  power  but  very 
wasteful  from  the  standpoint  of  gasoline  economy;  the  average 
carburetor  is  set  for  winter  operation  and  is  not  changed  in  the 
summer.  The  public  does  not  appreciate  the  saving  in  gasoUne  that 
would  result  from  the  use  of  lean  mixtures. 

1  Fieldner,  Straub,  and  Jones,  Automobile  Exhaust  Gases  and  ^'ehi^ula^- 
tunnel  Ventilation,  Jour.  Soc.  Aut.  Eng.,  April,  1921,  pp.  295-305. 


298  THE  MOTOR-FUEL  PROBLEM 

(4)  In  addition  to  the  improvement  in  respect  to  fuel  economy 
attainable  with  the  present  type  of  motor,  the  possibility  of  a  radical 
revision  in  engine  type  should  be  borne  in  mind.  The  injection  type 
of  high-compression  engine,  which  could  burn  all  types  of  liquid 
fuels,  is  thought  by  some  engineers  to  have  been  underestimated  in 
this  country.  The  steam  engine  also  has  its  advocates,  and  there 
are  other  possibilities  such  as  the  gas  turbine,  which  may  not  have 
been  sounded.  The  future  in  these  respects  can  scarcely  be  foreseen, 
although  the  development  of  automotive  transportation  to  its 
present  status  on  the  basis  of  a  carburetion  engine  places  the  power- 
ful force  of  standardization  behind  the  existing  type. 

Changes  in  the  FueL — It  has  been  seen  that  the  supply  of  motor- 
fuel  has  been  maintained  thus  far  mainly  by  a  volumetric  increase 
in  the  output  of  crude  petroleum,  supplemented  Ijy  a  physical  con- 
version of  the  heavy  molecules  of  distillate  fuel  oil  by  cracking 
into  gasohne.  Should  the  demand  exceed  the  combined  abihty  of 
these  first  two  expedients,  as  seems  inevitable,  mechanical  changes 
in  the  appliance  and  chemical  changes  in  the  fuel,  both  already 
beginning  to  come  into  evidence,  will  be  called  into  action  in  still 
further  degree.  It  thus  appears  that  there  are  four  major  factors 
involved ;  volumetric  increase  in  the  supply' ;  physical  changes  in  the 
fuel;  mechanical  changes  in  the  appliance;  and  chemical  changes  in 
the  fuel. 

The  possibilities  of  adding  to  petroleum  distillates  certain  com- 
pounds, such  as  benzol,  aniline,  or  alcohol,  which  will  increase  the 
operating  efficiency  of  the  fuel  in  existing  appliances  and  even  permit 
the  appliance  to  change  in  directions  making  for  greater  efficiency, 
have  already  been  touched  upon.  (See  Chapter  XXI.)  Such  pos- 
sibilities also  raise  the  question  of  whether  changes  may  not  be 
attainable  in  petroleum  refining  which  will  enable  certain  properties 
to  be  directly  fabricated  into  the  fuel  such  as  will  adapt  it  to  more 
efficient  utilization.  This  field  has  been  largely  overlooked  in  the 
past  and  holds  considerable  promise. 

Coordination  of  Engine  and  Fuel. — The  outstanding  feature  of 
the  motor-fuel  problem  is  the  interdependence  of  the  fuel  and  appli- 
ance, and  the  degree  to  which  any  change  in  one  has  an  immediate 
bearing  upon  the  other.  The  most  difficult  prol)lem  ahead  is  not 
the  matter  of  engineering  and  research,  but  the  economic  issue  of 
adjusting  the  efforts  in  respect  to  both  fuel  and  appliance  to  the  end 
that  the  maxinmm  service  may  be  gained  from  automotive  transpor- 
tation. The  supply  and  price  of  fuel  represent  the  limiting  factors 
in  automotive  transportation  and  the  best  efforts  of  all  concerned 
are  needed  to  hold  off  lestrictions  on  this  score. 


COORDINATION   OF   ENGINE   AND   FUEL  299 

Volumetric  increases  in  supply  have  apparently  been  shoved 
almost  to  their  maximum;  the  physical  process  of  cracking  holds 
further  possibilities  of  expansion,  although  already  called  into 
extensive  use;  mechanical  changes  in  the  appliance  give  promise  of 
considerable  extension ;  and  chemical  changes  in  the  fuel  offer  further 
possibilities.  Upon  the  interplay  of  these  factors,  the  future  of 
automotive  transportation  rests.  Much  will  de])cnd  upon  the  degree 
to  which  this  interplay  is  l^rought  under  control  in  a  united,  con- 
structive effort  to  solve  the  problem. 


CHAPTER  XXIII 
THE  CITY-GAS  PROBLEM 

The  manufacture  of  city-gas,  widely  used  in  American  municipal- 
ities, is  at  present  dependent  upon  one  of  the  petroleum  products, 
gas  oil,  for  its  principal  raw  material.  The  growing  fuel  require- 
ments of  automotive  transportation  have  recently  set  up  a  counter 
demand  for  gas  oil  for  use  in  the  manufacture  of  a  supplementary 
supply  of  gasohne,  and  this  competitive  demand  in  1920  critically 
restricted  the  supply  of  gas  oil  available  for  the  manufacture  of  gas 
as  well  as  sharply  advanced  its  price  to  a  level  which  the  gas  com- 
panies could  meet  only  under  a  substantial  increase  in  the  rates 
charged  for  city-gas. 

Upon  the  further  development  of  the  petroleum  situation,  the 
supply  of  gas'  oil  may  be  expected  to  become  still  more  restricted 
in  volume  and  progressively  higher  in  price,  until  finally  it  will  be 
generally  apparent  that  the  manufacture  of  city-gas  can  no  longer 
economically  rely  upon  this  source  of  supply,  and  attention  will  then 
turn  toward  making  gas  without  the  use  of  gas  oil.  Gas  of  this 
character  can  be  readily  and  cheaply  manufactured,  but  its  wide- 
spread development  will  entail  changes  in  the  present  installations 
and  revision  in  the  standards  of  concentration  now  imposed  by  the 
municipalities  upon  the  pubhc  utilities  serving  gas.  Such  changes, 
however,  are  inevitable  and  are  already  overdue. 

Types  of  City-gas. — There  are  four  principal  types  of  manufac- 
tured gas  employed  in  American  cities:  carburetted  water-gas,  coal- 
gas,  oil-gas,  and  coke-oven  gas.^  The  relative  importance  of  these 
four  types  is  shown  in  Fig.  138,  where  the  dominance  of  carburetted 
water-gas  is  apparent. 

Carburetted  water-gas  is  made  by  passing  steam  through  incan- 
descent coke  or  anthracite  coal,  and  enriching  the  resultant  water-gas 
with  gas  oil.  Average  practice  requires  about  3.5  gallons  of  gas  oil 
and  35  pounds  of  coke  or  anthracite  to  yield  a  thousand  cubic  feet 
of  city-gas  of  present-day  quality. 

1  A  good  general  description  of  the  main  types  of  city-gas  appears  in  Stand- 
ards for  Gas  Service,  U.  S.  Bureau  of  Standards,  Cir.  No.  22,  1920. 

300 


DEVELOPMENT  OF   CITY-GAS 


301 


322 


CARBURETTED 
WATER-GAS 


Coal-gas  is  made  by  distilling  a  volatile,  bituminous  coal  in  closed 
retorts,  leaving  a  residue  of  coke  to  be  disposed  of.     In  many  instances, 
the  coke  is  employed  in  turn  as  a  raw  material  for  the  manufacture 
of  carburetted  water-gas  which  is  then 
mixed  with  the  coal-gas. 

By-product  coke-oven  gas  is  an 
incidental  product  to  the  manufacture 
of  metallurgical  coke,  and  is  available 
for  use  in  some  cities  located  in  the 
neighborhood  of  industrial  coke-making 
establishments. 

Oil-gas  is  made  entirely  from  oil, 
and  is  manufactured  only  in  the  Far 
West  where  gas-making  coals  are  not 
readily  available. 

Development  of  City-gas.^ — The 
earliest  practical  application  of  gas 
was  made  toward  the  close  of  the 
eighteenth  century  in  England.  In 
1812  the  City  of  London  Gas  Light 
Company  was  formed,  and  in  1816 
gas-lighting  was  introduced  into  Balti- 
more in  this  country. 

Gas  accordingly  developed  as  an 
illuminant,  and  quite  naturally  its 
value  was  determined  by  its  illuminat- 
ing capacity.  In  the  early  stages  of 
the  industiy,  therefore,  gas  came  to 
be  measured  in  terms  of  its  candle- 
power,  the  intensity  of  light  produced 
when  burned  in  an  open-flame  burner 
under  specified  conditions.  Practically 
all  of  the  gas  manufactured  in  the  early 
days  of  the  industry  was  coal-gas. 

Around  1880  a  method  was  de- 
veloped for  rendering  water-gas,  which 

could  be  much  more  cheaply  manufactured  than  coal-gas  but 
lacked  luminosity,  available  for  illumination  by  enriching  it  with 
gas  oil.  Since  that  time,  carburetted  water-gas  has  enjoyed  a  rapid 
growth  in  the  United  States,  far  outdistancing  the  city-gas  manu- 
factured by  other  methods.     The  expansion  of  the  carburetted  water- 

'  For  a  constructive  discussion  of  the  gas  situation,  see  R.  B.  Harper,  City-gas 
of  the  Future,  Jour.  Western  Society  Engineers,  January,  1921,  pp.  1-15. 


FIGURES  ARE    WIILLIONS  OF   M.  CU.  FT. 

Fig.  1.38. — Estimated  production 
of  artificial  city  gas  in  the 
United  States  in  1919;  data  from 
American  Gas  Association. 


302  THE  CITY-GAS   PROBLEM 

gas  process  was  made  possible  by  the  era  through  which  the  petro- 
leum supply  was  passing,  with  production  crowding  demand  and 
yielding  a  cheap  and  abundant  supply  of  gas  oil  to  the  gas  manu- 
facturer. 

In  the  meantime  a  gradual  l)ut  almost  comj^lete  revolution  in  the 
utilization  of  gas  has  been  taking  jilacc,  accompanied  of  late  years  ])y 
profound  economic  changes  in  the  petroleum  supply,  but  the  processes 
of  manufacturing  gas  remain  to-day  practically  unchanged.  For 
the  first  sixty  or  seventy  years  following  its  introduction  in  this 
countiy,  city-gas  was  almost  solely  used  for  lighting  houses  and 
streets  by  means  of  open  flames  depending  for  their  luminosity 
upon  certain  hydrocarbons  dei'ived  from  volatile  bituminous  coals 
or  gas  oils,  which  emitted  considerable  light  when  the  gas  was  burned 
without  sufficient  aii*  to  maintain  complete  combustion.  In  contrast 
to  this  practice,  city-gas  is  now  used  almost  exclusively  for  its  heating 
effect  gained  from  the  so-called  Bunsen,  or  non-luminous  flame.  This 
type  of  flame  is  designedly  non-luminous,  sufficient  air  being  mixed 
with  the  gas  before  it  reaches  the  zone  of  ignition  to  lead  to  complete 
combustion,  leaving  no  unburned  particles  to  become  incandescent. 
This  mode  of  combustion  gives  higher  efficiency  and  flame  intensity 
than  the  open-flame  method  which  enjo,yed  its  luminosity  at  the 
expense  of  these  qualities.  The  luminous  flame  is  now  practically 
obsolete,  and  the  Bunsen  flame  is  employed  in  almost  all  gas-burning 
apparatus,  such  as  ranges,  stoves,  water-heaters,  and  mantle  fights. 
The  development  of  the  incandescent  mantle  emancipated  even 
gas-lighting  from  its  dependence  upon  potentially  luminous  con- 
stituents in  the  gas. 

In  spite  of  this  revolution  in  the  utilization  of  gas,  many  munici- 
palities still  require  the  gas  companies  to  continue  to  introduce  into 
the  gas  these  hydrocarbons,  as  if  the  product  were  going  to  be  used 
in  the  old-fashioned  open-flame  burners;  and  in  1920  these  same 
municipalities  even  granted  substantial  increases  in  rates  in  order 
that  the  gas  companies  might  aftord  to  buy  the  costly  hj^drocarbons 
requisite  to  cater  to  a  need  long  since  non-existent.  Such  was  the 
situation  in  New  York  City,  the  largest  gas-consuming  center  in  the 
countiy. 

The  change  in  the  method  of  utilizing  city-gas  has  resulted  in  a 
tendency  on  the  part  of  the  regulating  authorities  to  impose  upon  the 
gas  manufacturers  heating-value  standards  in  addition  to  the  existing 
candle-i)ower  requirements.  In  many  localities,  however,  the  public 
utility  commissions  have  discarded  the  candle-power  requirements, 
though  still  maintaining  heating-value  standards  substantially  the 
same  as  those  characteristic  of  gas  meeting  the  discarded  candle- 


THE  ROLE  OF  GAS  OIL  303 

power  requirements.  Thus,  it  has  happened  that  heating-value 
standards  have  been  determined  for  the  most  part  on  the  basis  of 
what  happened  to  have  been  the  heating  vahie  of  tlie  gas  designed  to 
be  used  in  Imninous  flames,  and  "  not  on  the  basis  of  processes  which 
were  designed  to  economically  utilize  the  gas-making  materials,  as 
provided  by  Nature,  in  such  a  maimer  as  to  pixjduce  the  greatest 
total  heating  value  per  unit."  In  short,  the  presence  of  costly 
hydrocarbons  in  the  gas  is  still  required  to  meet  the  heating  standards 
imposed  as  an  inheritance  from  the  days  of  candle-power  requirements. 

Accordingly,  the  manufacture  of  city-gas  to-day  is  handicapped  in 
many  instances  by  obsolete  lighting  standards,  and  in  all  instances 
by  heating  standards  involving  but  little  dmiinution  from  the  old 
candle-power  requirements.  Wherever  the  obsolete  form  has  been 
discarded,  the  old  sul^stance  has  been  preserved. 

The  Role  of  Gas  Oil. — The  function  of  gas  oil  is  to  add  to  the  gas 
those  hydrocarbons  needed  to  enable  the  gas  to  meet  the  candle- 
power  or  heating-value  standards  imposed  by  law.  Water-gas 
before  the  addition  of  gas  oil,  has  a  heating-value  of  only  300 
B.t.u.^  per  cubic  foot,  whereas  the  standards  usually  prevailing  for 
city-gas  run  from  520-600  B.t.u.  The  additional  B.t.u.  are  con- 
tributed by  the  gas  oil.  The  resulting  gas  is  more  concentrated  than 
the  straight  water-gas  and  meets  the  legal  requirements,  but  has  no 
advantage  in  utilization  where  the  Bunsen  flame  is  employed,  since 
gas  of  whatever  concentration  must  be  diluted  with  air  to  a  combus- 
tible mixture  cariying  only  about  100  B.t.u.  to  the  cubic  foot  before 
it  can  be  efficiently  Ijurned. 

The  Growing  Stringency  of  Gas  Oil. — Of  recent  years,  especially 
since  1915,  the  supply  of  gas  oil  has  come  more  and  more  under  requi- 
sition as  a  raw  material  for  cracking  into  gasoline.  In  1920  approxi- 
mately 12  to  15  million  barrels  of  gasoline  were  made  from  gas  oil, 
requiring  some  30  to  40  million  barrels  of  the  latter.  The  growth  of 
this  new  demand  for  gas  oil  has  been  ra]iid,  and  has  introduced  a  new 
and  perplexing  factor  into  the  city -gas  i)roblem.  The  effect  has 
already  registered  in  three  directions. 

In  the  first  place,  the  quality  of  the  gas  oil  has  deteriorated,  the 
gas  oils  highest  in  carburetting  quality  having  been  partly  diverted 
into  cracking  stills  and  their  place  taken  by  heavier  oils  less  susceptible 
to  yielding  gaseous  hydrocar})ons.  Cracking  into  gasoline  in  the  oil 
refinery  and  cracking  into  oil-gas  in  the  gas  plant,  indeed,  are  very 
similar  processes.  The  trend  in  the  average  quality  of  gas  oil  is 
shown  in  Fig.  139. 

'B.t.u.  is  tho  ahhrcviiilion  for  Hrilisli  Ihcnnal  unit,  Ihc  (luaiility  of  heat 
recjuinHl  to  raiso  1  pound  of  water  1  dofin'o  KalircMilicit . 


304 


THE  CITY-GAS  PROBLEM 


THOUSANDS 

OF  B.T.  U. 

200 


'J50 


lOO 
90 
80 
70 


60 


' 

_B.  T.  u 

-£2i!rR,BUTEDBY^jv^ 

^S- 

o. 

< 

In  the  second  place,  there  has  been  a  tendency  to  reduce  the 
quantity  of  gas  oil  used,  as  a  result  of  cutting  as  closely  as  possible 
to  the  minimum  limits  of  the  B.t.u.  standard  as  well  as  slightly  lower- 
ing this  standard  in  some  lo- 
calities. The  tendency  toward 
the  use  of  a  tapering  quantity 
of  gas  oil  per  M  cubic  feet  of 
gas  is  shown  in  Fig.  140. 

In  the  third  place,  a  notable 
advance  in  the  price  of  gas 
oil  has  taken  place,  which  has 
considerably  increased  the  cost 
1915  1916  1917  1918  1919  1920  of  mauuf acturing  gas.  In 
Fig.  139.— Deterioration  in  the  quality  of  ^^^^,  1  cent's  worth  of  gas  oil 
gas  oil,  1914-1920;  data  from  R.  B.  Hari)er.    COntri])Uted  to  the  finished  gas 

over  twice  the  number  of 
B.t.u.  derived  from  1  cent's  worth  of  generator  fuel  (coke  or 
anthracite).  Since  that  time,  the  relative  contribution  made  by 
gas  oil  has  been  decreasing  more  rapidly  than  the  contribution 
made  by  generator  fuel,  until  in  1920  the  cost  of  heat  units  of  gas- 
oil  origin  was  higher  than  that 
of  an  equivalent  number  produced 
from  generator  fuel.  The  tend- 
ency for  gas  oil  to  impose  a 
growing  burden  of  expense  upon 
the  manufacturing  process  is 
shown  in  Fig.  141,  which  also 
suggests  that  the  divergence  is 
going  to  increase  still  further. 

The  Impending  Shortage  of 
Crude  Petroleum. — A  tightening 
up  in  the  sui^jily  of  gas  oil  has 
already  taken  place  under  the  in- 
fluence of  the  gasoline  require- 
ments of  automotive  transpor- 
tation, in  spite  of  a  rapidly 
mounting  output  of  crude  pe- 
troleum.    In  view  of  the  relative 

smallness  of  the  petroleum  reserve,  both  in  this  country  and 
Mexico,  and  the  close  approach  to  the  maximum  rate  at  which  this 
reserve  may  be  drawn  upon,  the  supj^ly  of  crude  petroleum  will 
inevitably  display  a  retardation  in  its  growth  which  will  restrict  the 
volume    of    products    available    for    consumption.     (See  Fig.    142.) 


GALLON 

4.20 

%. 

3. BO 
3.70 

\ 

1 

\ 

1915       1916      1917       1918       1919      1920 


Fig.  140. — Trend  in  the  use  of  gas  oil 
per  thousand  cu.  ft.  of  carburetted 
water-gas  manufactured  in  the  United 
States  by  years,  1915-1920;  data  from 
R.  B.  Harper. 


USE   OF   GAS  OIL  ALREADY   UNECONOMIC 


305 


This  outcome  may  be  expected  to  impair  still  further  the  availability 
of  gas  oil  and  contribute  an  additional  and  continuing  impetus  to  its 
upward  move  in  price. 

Use  of  Gas  Oil  Already  Uneconomic. — The  relative  increase  in 
the  price  paid  by  a  typical  gas  company  for  gas  oil  and  generator  fuel 


PER  CENT 

200 


lOO 
90 

80 

70 

60 


^^ 

'^''"^ 

k 

^ 

V 

\ 

^ 

\ 

\ 

^ 

.-/ 

V 

^..^ijjGE 

NERATOR 

FUEL       / 

/ 

\ 

V          \ 

\ 

/ 

^ 

\ 

> 

<. 

GAS  OIL 

\\ 

\,    , 

I 
I 
1 
1 

X 
X 

N 

\ 

V 

1 
1 
1 

\ 

/       \ 

\ 

OPERATING 
D  COURSE  A 

FIGURES 
HEAD 

..«.««»   PROJECTE 

1 

1914 


1915 


1916 


1917 


1918 


1919 


1920    1921 


1922 


Fig.  141. — Trend  of  the  contributions  to  the  heating  value  of  carburetted  water- 
gas  made  by  one  cent's  worth  of  gas  oil  and  generator  fuel,  in  percentages 
of  the  contributions  made  in  1914;  data  for  1914-1920  from  R.  B.  Harper; 
projection,  1921-1922,  by  author. 

for  the  period,  1914-1920,  is  shown  in  Fig.  143.     The  average  cost  of 
gas  oil  to  a  large  number  of  gas  companies  is  given  in  Table  119. 

It  is  apparent  from  the  data  given  tliat  the  sharp  upward  trend 
in  the  price  of  gas  oil,  which  arises  in  the  main  from  fundamental 
changes  in  the  petroleum  situation,  is  rendering  the  use  of  gas  oil 
increasingly  costly.  Fig.  144  shows  plainly  the  weight  of  this  factor 
in  the  cost  of  gas.     A  cul)ic  foot  of  typical  carburetted  water-gas 


306 


THE   CITY-GAS  PROBLEiM 


containing  570  B.t.u.  may  be  looked  upon  as  composed  of  300  B.t.u. 
contributed  by  generator  fuel  and  270  B.t.u.  derived  from  gas  oil. 
Several  years  ago  the  270  B.t.u.  cost  about  the  same  as  the  300  B.t.u. 
In  1920  the  270  B.t.u.  were  much  the  more  costly,  and  the  tend- 
ency is  toward  a  growing  discrepancy  between  the  two.  In  other 
words,  so  far  as  the  cost  of  materials  is  concei-ned,  the  use  of  gas  oil 
in  manufacturing  city  gas  has  become  fundamentally  uneconomic, 


g    8,000  r 


O    7,000 
CO 

z 
o 

^    6,000 

i 

z 

~    5,000 


3,000 


2,000 


1,000 


• 1920  


CRUDt    OIL   PRODUCED 


SKETCH 

ILLUSTRATING 

-  ACTUAL  AND    ESTIMATED   - 

RATE  OF   PRODUCTION 

OF 

TOTAL    PETROLEUM 

PRODUCED   Si    PRODUCIBLE 

IN 

KNOWN    FIELDS   OF  THE 

UNITED  STATES 


m^:iMi  mm:^^m^M 


OIL    UNDERGROUND 


— 193  O- 


W^. 


Fig.  142. — The  iinmined  reserve  of  rrudo  j)etrolemn  in  the  United  States; 
K.  B.  Harper,  based  on  data  from  U.  S.  Geological  Survey 


ifter 


in  spite  of  a  temporary  reversal  in  1921.  Accordingly,  the  manu- 
facture of  carburetted  water-gas  has  passed  through  its  period  of 
usefulness  and  is  now  obsolescent  because  of  the  diversion  of  its 
principal  raw  material  into  a  channel  of  higher  economic  rank. 

Increase  in  Gas  Rates  no  Solution. — The  growing  cost  of  gas  oil 
has  borne  hea^'ily  upon  tlie  cost  of  manufacturing  gas,  as  indicated 
in  Fig.  144,  and  the  gas  companies  met  the  situation  by  entering 
pleas  for  higher  rates,  which  in  most  instances  were  granted. 
While  increases  in  gas  rates  will  support  a  rising  price  of  gas  oil 


INCREASE   IN   GAS   RATES   NO   SOLUTION 


307 


and  for  a  time  enable  the  gas  companies  to  continue  to  compete 
with  automotive  transportation  for  this  raw  material,  such  increases 
will  not  alter  the  fundamental  situation;    they  represent,  on  the 


PER  CENT 
500 


lOO 
90 
80 
70 
60 


/ 

GAS 

OIL 

// 

/ 

^ 

/ 

/ 

-^ 

/ 

/ 

\TOR-FUE 

1915    1916 


1917 


1918         1919         1920 


Fi(i.  143. — Rise  in  the  average  price  of  gas  oil  and  generator  fuel,  1914-1920,  in 
percentages  of  the  average  prices  in  1914;   data  from  R.  B.  Harper. 


T.\HLK   119. AvEKAflK  CoST  OF  GaS  OiL  TO  A  LaRGE  NuMBER  OF  GaS  COMPANIES 

BY  Years,  1910-1920 
(Data  from  American  Gas  Association) 


Year 

rV'iit.s  per 
Cialloii 

In  Per  Cent 

of  Price  in 

1013 

Year 

Cents  per 
Call  on 

In  Per  Cent 
of  Prioe  in 

iin.j 

1910 
1911 
1912 
191.3 
1914 
1915 

3.08 
2. 90 
3.40 
4.35 
4.35 
3.57 

71 

68 

78 

100 

100 

82 

1916 
1917 
1918 
1919 
1920 

4.14 
5.76 
7.90 
7.05 
12.02 

95 
132 
182 
162 
290 

contrary,  a  temporizing  measure  but  no  final  solution  to  the  prob- 
lem.    In  fact,  a  succession  of  such  increases  in  gas  rates  will  insti- 


308 


THE   CITY-GAS  PROBLEM 


tute  a  cj'cle  which  will  react  upon  the  price  of  gasoline  as  well  as 
upon  the  price  of  city-gas,  playing  the  two  against  each  other  wdth 
neutral  effect  and  leaving  the  basic  issue  still  unsolved. 

Fundamental   Changes   in   Gas   Manufacture   Necessary. — Suf- 
ficient evidence  is  now  available  to  indicate  that  the  manufacture 


11. 


16 


-  25 


'.27  -■ 


.36 


>  GAS  OIL 


.GENERATOR 
FUEL 


1916  1917  1918  1919  1920 

FIGURES   IN    RECTANGLES   ARE  THE   COST   IN   CENTS  OF  THE    MATERIALS    ENTERING 
INTO   THE    MANUFACTURE   OF  lOOO   CU.  FT.   OF   CARBURETTED   WATER-GAS 

Fig.  144. — Relative  cost  of  the  quantity  of  gas  oil  and  generator  fuel  entering 
into  the  t>'pical  manufacture  of  1000  cu.  ft.  of  carburetted  water-gas,  by 
years,  1916-1920. 

of  carburetted  water-gas  must  give  way  to  other  processes  more 
suitable  to  the  changed  conditions  of  fuel  supply.  The  outstanding 
fuel  dependency  of  this  country  is  bituminous  coal,  and  the  city- 
gas  of  the  future  must  be  derived  from  this  source.  The  conditions 
requiring  the  use  of  a  concentrated,  luminous  gas  are  no  longer 


A  TRANSITION   PERIOD  AHEAD  309 

existent;  and  the  means  for  preparing  such  a  gas  cheaply  are  no 
longer  attainable.  The  situation  has  finally  advanced  to  the  point 
where  there  is  no  choice  in  the  matter.  The  methods  of  manu- 
facturing city-gas  are  bound  to  undergo  fundamental  changes  in  the 
next  decade,  and  economic  pressure  may  dictate  more  rapid  altera- 
tions than  appear  practicable  at  the  present  moment.  The  changes 
that  appear  inevitable  lie  in  the  direction  of  complete  gasification 
of  bituminous  coal,  with  the  preparation  and  distribution  of  a  less 
concentrated  gas  than  that  now  in  general  use  in  cities. 

B.t.u.  Standards  Will  be  Lowered. — At  the  present  time  the  situ- 
ation is  ciystallized  and  progress  blocked  by  virtue  of  the  legal  B.t.u. 
standards  in  vogue  which  do  not  admit  of  processes  yielding  low-cost 
gas  because  such  gas  is  invariably  leaner  than  the  standards  require. 
There  has  already  come  into  evidence  a  distinct  downward  trend  in 
heating-value  requirements;  some  municipalities  now  have  a  520 
B.t.u.  minimum,  whereas  in  Canada  a  450  B.t.u.  standard  has  been 
established.  It  is  inevitable  that  the  present  high  standard  will  be 
removed  by  degrees  and  the  field  thus  opened  to  the  emplo^mient 
of  modern  and  efficient  means  for  manufacturing  gas. 

A  Transition  Period  Ahead. — In  addition  to  the  obstacle  of  high 
heating-value  requirements,  which  is  an  inheritance  from  the  days 
when  gas  was  burned  in  open-flames  for  purposes  of  illumination, 
progress  toward  gaining  low-cost  gas  will  be  retarded  by  the  past 
failure  to  prepare  for  the  obsolescence  of  present  installations  and 
equipment — a  failure  which  leaves  a  vast  investment  amortized  to 
an  insufficient  degree  as  well  as  a  wide  range  of  equipment  which 
can  be  adapted  to  the  new  conditions  with  difficulty.  The  situation 
is  indeed  perplexing  and  raises  problems  of  the  first  magnitude — 
problems,  too,  made  none  the  easier  because  they  lie  in  the  field 
where  public  oversight  is  exercised  in  a  manner  unfortunately  lack- 
ing in  technical  proficiency. 

The  transition  to  low-cost  gas,  however,  can  be  made,  and  the 
gas  industrv  emancipated  from  its  present  dependence  upon  gas  oil, 
if  constructive  and  concerted  attention  be  accorded  the  matter.  A 
graded  reduction  in  B.t.u.  standard,  accompanied  by  a  decrease  in 
the  quantity  of  oil  employed  as  well  as  by  a  change  to  heavier 
oils  not  so  desirable  for  cracking  into  gasoline,  will  result  in  a  period 
of  transition  during  which  present  installations  may  Ije  utilized 
w^hile  the  requisite  new  developments  are  gi-adually  brought  into 
action. 

City-gas  of  the  Future. — With  Amei-ican  cities  served  at  present 
by  carburetted  ^\atcr-gas,  coal-gas,  oil-gas,  and  coke-oven  gas,  not 


310  THE  CITY-GAS  PROBLEM 

to  mention  a  declining  supply  of  natural  gas,  it  appears  inevitable 
that  those  processes  dependent  upon  oil  must  inevitably  give  way  in 
favor  of  other  established  methods  or  new  processes. 

One  of  the  cheapest  and  most  efficient  methods  already  estab- 
lished for  manufacturing  gas  is  the  generation  of  straight  water-gas 
from  coke  or  anthracite  coal.  This  3'ields  a  relativel}'  dilute  gas  of 
about  300  B.t.u.,  which  consequently  cannot  be  used  under  existing 
standards,  without  being  enriched  with  gas  made  from  gas  oil.  Coal- 
gas  is  manufactured  in  many  cities,  but  while  this  type  of  gas  is  of 
requisite  concentration  to  meet  existing  standards,  its  installation  is 
costly  and  it  yields  a  large  output  of  coke  which  must  be  disposed  of 
as  fuel;  gas-house  coke  has  not  proved  to  be  a  w-hoUy  satisfactory 
fuel  and  its  sale  has  not  been  altogether  regular  or  profitable.  In 
some  municipalities  the  coke  from  the  coal-gas  retorts  is  used  in  turn 
as  generator  fuel  in  water-gas  sets,  the  resulting  water-gas  being 
mixed  with  the  coal-gas  to  yield  a  gas  of  about  350-450  B.t.u., 
which  is  then  raised  to  the  desired  heating-value  by  the  admixture  of 
oil-gas.  The  production  of  this  mixed  gas  is  the  most  economical 
established  procedure  under  the  majority  of  conditions  to-day.  The 
process  is  also  aided  by  the  recoveiy  of  some  of  the  by-product  values 
in  the  coal-gas  retorts. 

Considerable  improvements  are  immediately  possible  in  the  man- 
ufacture of  mixed  gas,  through  the  combination  of  the  coal-gas  and 
water-gas  generation  into  practically  a  continuous  process,  which 
will  yield  much  better  heat  economy  and  hence  lower  operating  costs 
than  now  prevalent.  At  the  same  time,  as  B.t.u.  standards  are 
lowered,  a  decreasing  quantity  of  oil  may  be  employed  in  the  enrich- 
ment, until  the  use  of  gas  oil  is  done  away  with  entirely,  approxi- 
matety  a  400  B.t.u.  gas  being  the  end-product  then  distributed.  Such 
a  gas  is  an  ultimate,  rather  than  an  immediate,  desideratum,  since  its 
use  would  entail  modifications  in  existing  appliances  and  methods  of 
distriljution.  The  economic  pressure  alread}^  in  evidence  will 
inevitably  force  developments  into  this  channel,  which  admits  not 
only  of  the  fuUest  use  of  present  installations  and  equipment  but  also 
is  nearest  in  line  with  the  stable  source  of  fuel  supply. 

The  whole  field  of  development  in  respect  to  gas  has  been  rela- 
tively stagnant,  but  once  the  barrier  of  an  outworn  thermal  standard 
is  broken  down  and  the  inertia  that  has  always  characterized  the 
gas  situation  is  supplanted  by  a  vigorous  sense  of  the  latent  possibil- 
ities in  gas,  substantial  progress  may  be  expected.  The  field  of 
city-gas  enmeshes  closel}^  with  the  undeveloped  possibilities  of  gas  in 
respect  to  industrial  heating  and  even  power  application;  and  once 
the  production  of  city-gas  is  placed  upon  a  low-cost  basis,  soundly 


CITY-GAS  OF  THE   FUTURE  311 

grounded  in  the  complete  gasification  of  bituminous  coal,  and  proper 
attention  is  accorded  the  efficiency  of  utilization,  the  full  possibilities 
of  this  mobile  form  of  energy-  may  begin  to  be  realized,  with  incalcul- 
able benefit  to  all  concerned.  In  all  progressive  municipahties  gas 
must  eventually  largely  supersede  raw  coal  in  the  homes  and  factories; 
not  until  then  may  the  city-gas  problem  be  regarded  as  solved.^ 

1  For  a  further  discussion  of  the  potentiahties  of  gas,  see  Gilbert  and  Pogue, 
America's  Power  Resources,  New  York,  1921,  pp.  184-213. 


CHAPTER  XXIV 
INTERNATIONAL  ASPECTS  OF  PETROLEUM 

Until  a  few  years  ago  the  oil  deposits  of  the  United  States  were 
generally  regarded  as  ample  to  supply  her  needs.  The  production  of 
crude  petroleum,  indeed,  increased  so  rapidly  that  organized  effort 
was  directed  mainly  toward  enlarging  the  domestic  demand  and 
finding  additional  outlets  abroad.  Once  fairly  under  wa}',  however, 
the  demands  for  the  products  of  petroleum  have  expanded  at  a 
geometric  rate  until  the  problem  of  finding  a  sufficient  volume  of 
raw  material  to  meet  future  requirements  is  of  paramount  impor- 
tance. Within  a  short  space  of  time,  there  has  been  a  reversal  from 
a  situation  in  which  production  was  forcing  new  outlets  to  one  in 
which  an  insistent  demand  is  seeking  assurance  of  an  adequate 
supply. 

Two  factors  have  accentuated  this  change.  The  war  brought 
petroleum  to  the  front  as  a  necessity  of  the  first  rank;  and  a  realiza- 
tion of  a  hmitation  in  supply  has  come  into  account.  The  inability 
of  the  domestic  petroleum  resource  to  meet  fully  the  responsibility 
which  it  has  engendered  is  directing  attention  in  growing  measure 
to  foreign  sources  of  supplemental  supply.  Thus  the  United  States 
is  projected  into  the  international  struggle  for  oil  and  is  facing  a 
new  range  of  complications  in  this  field. 

Political  and  Commercial  Control  of  Oil  Production. — The  oil 
production  of  the  world  ^  may  be  classified  according  to  the  national- 
ities exercising  political  control  of  the  productive  areas  or  according 
to  the  commercial  interests  directing  their  exploitation.  During 
the  war  the  U.  S.  Bureau  of  Mines  analyzed  the  mineral  resources 
of  the  world  in  these  two  respects,^  and  the  results  for  petroleum  are 
shown  in  Fig.  145  and  Table  120. 

It  is  apparent  from  Fig.  145  and  Table  120  that  in  1917  the  United 
States  exercised  political  (or  territorial)  control  over  67  per  cent  of 
the   petroleum    produced    throughout   the   world,    and    commercial 

^  See  pp.  52-53  for  statistics  on  the  world's  production. 

*  The  results  of  this  investigation  were  published  by  J.  E.  Spurr,  Political 
and  Commercial  Geology  and  the  World's  Mineral  Resources,  New  York,  1920. 
Chapter  I,  on  petroleum,  is  by  John  D.  Northrop. 

312 


POLITICAL  AND   COMMERCIAL  CONTROL 


313 


(financial)  control  over  a  slightly  greater  part,  72  per  cent.  Pro- 
portions of  substantially  the  same  oider  of  magnitude  obtain  for 
1920. 


Table  120. 


-Political  and  Commercial  Control  of  the  World's  Output  of 
Petroleum  in  1917 

(After  John  D.  Northrop) 


Country 

Pro- 
duction, 
Millions  of 
Barrels 

Country  Exercis- 
ing Political 

Control 

Nationality 

of  Dominant 

Commercial 

Interest 

Approximate 

Extent  of  Control 

by  Dominant 

Interests, 

Per  Cent 

United  States 

Russia 

Mexico 

Dutch  East  Indies  . 
India 

Persia 

Galicia 

Japan  and  Formosa 

Rumania 

Peru 

Trinidad 

335 
69.0 
55.3 
12.9 

8.08 

6.86 
5.97 
2.90 
2. 68 
2.53 

1.60 
1.14 
3.04 

United  States 
Russia 
Mexico 
Holland 

Great  Britain 

Persia 
Poland  (?) 

Japan 
Rumania 

Peru 

Great  Britain 

Argentina 
Miscellaneous 

United  States 

United  States 
British-Dutch 
United  States 
British-Dutch 
Great  Britain 

Great  Britain 

Germany 

Japan 

British-Dutch 

United  States 

Great  Britain 

Argentina 
Miscellaneous 

United  States 

96 
40 
65 

100 
100 

100 

100 

100 

36 

70 

80 
100 

Argentina 

Others 

Total 

507 

72 

Political  and  Commercial  Control  of  Oil  Reserves. — The  control 
of  oil  reserves  is  an  entirely  different  matter  from  the  control  of  oil 
production,  although  the  two  have  not  been  clearly  distinguished 
in  all  discussions  of  the  matter.  During  the  past  few  years,  pro- 
found changes  have  been  made  in  the  political  and  commercial  map 
of  the  world,  and  while  many  of  these  changes  are  still  in  doubt  and 
hence  to  be  spoken  of  with  due  reservation,  there  is  an  unmistakable 
correlation  to  be  observed  between  the  territorial  adjustments  and 
the  unmined  supplies  of  petroleum.     (See  Fig.  146.) 

While  the  petroleum  reserves  outside  the  United  States  are  still 
unmeasured,  except  in  a  provisional  manner,  the  available  evidence 
tends  to  indicate  that  approximately  seven-eighths  of  the  petroleum 
remaining  to  be  produced  in  the  world  lies  outside  the  Ijoundaries  of 
this  country.  In  other  word,  though  exercising  territorial  command 
of  over  two-thirds  of  the  world's  actual  production  of  petroleum,  this 


314 


INTERNATIONAL  ASPECTS  OP  PETROLEUM 


POLITICAL   CONTROL 
(TERRITORIAL) 


COMMERCIAL   CONTROL 

(FINANCIAL) 


UNITED  STATES 
/^      .675; 


.r!js_s,ia; 


UNITED  states 
7  2   ■ft 


countiy  possesses  political 
control  over  only  something 
like  one-eighth  of  the  re- 
source. In  the  face  of  this 
circumstance,  and  in  view 
of  the  fact  that  the  United 
States  consumes  over  half 
of  the  petroleum  products 
turned  out  and  supplies 
over  three-quarters  of  the 
world's  requirements  in  re- 
spect to  these  commodities, 
the  American  petroleum  in- 
dustry is  seeking  to  extend 
its  commercial  control  in 
foreign  fields. 

On  page  24,  Fig.  6,  is 
a  map  of  the  world,  com- 
piled by  the  U.  S.  Geological 
Survey,  showing  the  loca- 
tion and  estimated  size  of 
the  petroleum  reserves  of 
the  world,  together  with 
an  indication  of  some  of 
the  broad  features  of  polit- 
ical control  obtaining  at 
the  tmic  the  map  was  pre- 
pared in  1919.  The  map 
brings  out  the  concentra- 
tion of  the  oil  reserves  in 
five  regions:  the  United 
States,  the  area  bordering 
the  Caril)bean  Sea,  the  re- 
gion adjacent  to  the  Caspian 
Sea,  the  Far  East,  and 
southern  South  America. 
The  map  affords  an  inter- 
esting key  to  many  of  the 
recent  moves  in  the  game  of 
world  politics. 

New  Problems    in  Pe- 

FiG.  145— Political  and  commercial  control  of  tioleum  Exploitation.  —  In 
the  world  s  production  of  crude  petroleum  extending  commercial  ac- 
in  1917;  after  Sinirr  and  Northrop. 


■  .B  R  I.T^E  M  "pV2^?i:; 


ALL   OTHERS 


NETHERLANDS 


g;erm.anx2'«' 


ALL   OTHERS 


THE   PROBLEM   OF   NATIONALIZATION 


315 


tivities  into  foreign  territories,  the  American  petroleum  interests 
are  encountering  two  problems  of  outstanding  importance,  new 
to  the  exploitation  of  petroleum  in  this  country.  These  are:  A 
tendency  toward  the  nationalization  of  the  petroleum  resource, 
especially  marked  among  the  smaller  independent  countries,  par- 
ticularly in  the  Caribbean  area  and  in  southern  South  America; 
and  keen  international  rivahy  in  the  Old  World  on  the  part  of  the 
industrial  powers,  with  the  situation  already  far  advanced  toward 


PRODUCTION 
1920 


RESERVES 

(ESTIMATED) 


OTHER    COUNTRIES 


UNITED   STATES 


Fig.  140. — Chart  showing  the  ijroportions  of  the  world's  i)ro(kiction  and  reserves 
of  crude  jK-trokMini  in  the  territory  controlled  politically  by  the  United 
States. 


an  exclusive  undei-standing  and  a  division  into  definite  spheres  of 
influence.  Throughout  both  fields  there  rims  as  well  the  keen 
commercial  rivalry  connnon  to  business  enterprise. 

The  Problem  of  Nationalization. — The  liatin-American  countries, 
in  which  the  ownership  of  the  natiu'al  resources  in  the  colonial  days 
was  vested  in  the  crown,  are  showing  a  growing  tendency  to  retain 
and  even  reinstate  the  petroleum  rights  under  the  sovereignty  of  the 
nation.  Of  the  Latin- American  countries — the  states  coming  under 
the  sphere  of  the  Monroe  Doctrine — ownership  of  the  oil  in  the 


316  INTERNATIONAL  ASPECTS  OF  PETROLEUM 

ground  rests  in  the  government  in  Bolivia,  Costa  Rica,  and  Venezuela, 
and  in  part  in  Argentina,  Colombia,  and  Ecuador;  while  movements 
further  to  vest  oil  rights  in  the  state  are  in  progress  in  Colombia,  the 
Dominican  Republic,  and  Mexico.^  This  policy  in  Mexico  has 
naturally  attracted  the  widest  notice,  because  of  the  extensive 
petroleum  developments  in  that  countiy;  the  new  constitution  of 
1917,  with  its  famous  Article  27  declaring  "  in  the  nation  is  vested 
direct  ownership  of  all  minerals,  petroleum,  and  hydrocarbons,"  and 
arousing  the  fear  of  its  retroactive  application,  has  already  become 
a  point  at  issue  between  the  foreign  operators  and  the  Mexican 
Government. 

The  extent  to  which  this  movement  toward  nationalization  of  the 
petroleum  reserves  will  go  cannot  be  foreseen,  but  the  consequences 
will  undoubtedly  be  in  the  direction  of  Imiiting  the  degree  to  which 
outside  commercial  control  may  be  gained  and  slowing  down  the  rate 
at  which  the  resources  may  be  developed. 

National  ownership  of  the  oil  in  the  ground  is  not  confined,  of 
course,  to  the  Latin-American  countries,  being  true  in  varying  degree 
of  France,  the  United  Kingdom,  the  British  Colonies,  Slovakia,  and 
Russia. 

The  Problem  of  International  Rivalry. — Oil  has  become  so  essen- 
tial to  modern  civilization  that  other  industrial  nations  are  aggres- 
sively seeking  both  commercial  and  political  control  over  oil-bearing 
territories.  Efforts  toward  enlarging  political  control  have  appar- 
ently been  confined  to  the  Eastern  Hemisphere,  though  commercial 
activities  have  been  extended  over  the  entire  world,  especially  by 
British,  Dutch,  and  French  interests.  In  some  directions,  the  polit- 
ical and  commercial  efforts  have  joined  hands.  The  Govermnent  of 
Great  Britain,  for  example,  "  has  established  a  petroleum  adminis- 
tration; owns  a  controlling  partnership  with  veto  powers  on  the 
board  of  directors  in  the  Anglo-Persian  Oil  Company,  which  con- 
trols the  oil  resources  of  the  greater  part  of  Persia;  gives  financial 
assistance  to  its  nationals  engaged  in  oil  development  and  is  in  every 
possible  way  promoting  the  acquisition  by  companies  under  British 
control  or  companies  exclusively  British,  of  oil  reserves  in  all  coun- 
tries, including  our  own."  ^ 

Petroleum  has  also  become  involved  in  the  administration  of  the 
mandate  territories  that  grew  out  of  the  war.  At  San  Remo  in 
April,  1920,  Great  Britain  and  France  negotiated  an  agreement 
"  based  on  the  principles  of  a  cordial  collaboration  and  reciprocity 

1  See  David  White,  The  Petroleum  Resources  of  the  World,  Annals  of  the 
American  Academy,  May,  1920.     See  also  Congressional  Record,  May  17,  1920. 

2  White,  op.  cit.,  p.  21. 


THE   SIGNIFICANCE  OF  OCEAN  SHIPPING  317 

when  the  petroleum  interests  of  the  nations  can  be  negotiated  to 
advantage,"  which  agreement  "  may  be  extended  to  other  countries 
by  mutual  consent,"  whereby  the  two  countries  party  to  the  agree- 
ment would  enjoy  certain  advantages  in  developing  the  petroleum 
resources  of  Rumania,  Asia  Minor,  territories  of  the  former  Russian 
Empire,  Galicia,  the  French  colonies,  and  the  colonies  of  the  British 
Crown.i  This  Project  of  Agreement  resulted  in  the  interchange 
of  notes  between  Great  Britain  and  the  United  States,  Math  special 
reference  to  Article  7  relating  to  Mesopotamia,  the  United  States 
claiming  equal  oil  privileges  in  mandate  territory,  with  Great  Britain 
maintaining  that  the  San  Remo  agreement  was  based  upon  concessions 
granted  to  British  nationals  by  the  former  Turkish  govermnent. 

International  rivalry  for  petroleum  has  led  to  restrictive  legisla- 
tion on  the  part  of  some  coimtries  favoring  exploitation  by  their 
own  nationals,  and  in  this  wise  a  new  phase  of  nationahzation  has 
been  projected  into  the  problem. 

The  Significance  of  Ocean  Shipping. — The  advantages  of  fuel  oil 
for  ocean  transportation  and  naval  operations  have  undoubtedly 
played  an  important  part  in  determining  the  policy  of  Great  Britain 
in  acquiring  foreign  reserves  of  petroleum,  while  these  factors  have 
also  influenced  the  activities  of  the  United  States.  The  suggestion 
has  also  been  advanced  that  the  growing  social  consciousness  of  the 
coal-miners  in  Great  Britain  has  been  an  added  incentive  foi-  an 
active  develojmient  of  a  petroleum  supply.  At  any  rate,  the  sig- 
nificance of  oil  in  the  maritime  field  is  a  sufficient  explanation  of  the 
world-wide  interest  that  has  been  taken  in  oil.  The  question,  there- 
fore, arises  as  to  whether  the  world's  supply  of  petroleum  is  suffi- 
ciently great  to  sustain  automotive  transportation  on  land,  lubri- 
cate the  wheels  of  industry  and  commerce,  and  support  the  revolu- 
tion in  ocean  shipjiing  to  an  oil-burning  basis.  It  is  by  no  means  a 
foregone  conclusion  that  the  merchant  marine  of  the  world  can 
count  upon  a  supply  of  oil  sufficiently  cheap  to  sustain  its  operations 
for  more  than  a  relatively  })rief  period  of  years. 

There  are  approximately  55  million  tons  of  steam  shipping  in  the 
world,  and  roughly  speaking  its  entire  conversion  to  an  oil-fired 
basis  would  re(}uire  an  annual  consumption  of  over  500  million  ])arrels 
of  oil,  or  nearly  the  total  quantity  of  petroleum  ]iroduccd  in  the  world 
to-day.  The  unit  consumption,  of  course,  can  be  reduced  consider- 
ably by  the  universal  adoption  of  Dies(4  engines;  but  at  best  the  oil 
consumption  would  still  be  of  outstanding  size. 

The  utilization  of  oil  by  ocean  shii)iiing,  however,  is  lunited  more 
directly  by  the  matter  of  price,  and  there  are  many  reasons  for 
1  See  M.  L.  Heqvia,  The  Petroleum  Problem,  1920,  pp.  35-36. 


318  INTERNATIONAL     ASPECTS     OF     PETROLEUM 

believinjj;  that  petroleum  to  date  has  been  produced  abnormally 
cheap,  if  not  actuall}^  at  a  sub-economic  level.  Once  the  flush  pro- 
duction of  the  richest  deposits  are  exhausted  and  once  the  efficient 
utiUzation  of  the  liigher-rank  petroleum  products  is  gained,  even 
ocean  shipping  niaj^  be  forced  largely  to  abandon  the  use  of  this 
product.  Such  possibihties  seem  to  have  been  generally  lost  sight 
of,  under  the  competitive  spur  of  the  advantages  offered  by  oil  at 
the  present  price-level.  But  whatever  the  future  of  oil,  the  fact 
remains  that  it  is  now  definiteh'  involved  in  competitive  shipping 
efforts,  and  a  growing  use  in  tliis  direction  will  probably  be  seen  for 
some  time  at  least. 

Suggested  Lines  of  Action. — It  is  thus  apparent  that  petroleum 
has  been  projected  into  the  international  arena  as  an  issue  of  the  first 
magnitude.  Eagerly  sought  as  a  source  of  national  power  and  indus- 
trial advantage,  the  remaining  supplies  have  come  in  for  intense 
competition,  complicated  by  nationalistic,  socialistic,  and  imperialis- 
tic aspirations.  As  a  result  of  these  conchtions,  the  American  petro- 
leum interests  have  met  with  restrictions  in  their  efforts  to  extend 
commercial  control  into  foreign  fields. 

Various  suggestions  have  })een  offered  with  a  view  to  enabling 
the  commercial  interests  of  the  United  States  to  participate  more 
fully  in  the  development  of  foreign  oil-deposits.  Among  the  lines 
of  action  advocated  are:  Direct  goverrmient  participation  in  the 
development  work;  govermnental  support  to  private  enterprise; 
vigorous  diplomatic  action  to  secure  an  open-door  policy  and  equality 
of  opportunity  to  all  nations;  the  use  of  economic  pressure  and 
retaliatory  measures  to  gain  this  end;  and  manj^  others.  The  sug- 
gestions have  mainly  been  in  the  direction  of  invoking  some  degree 
of  political  support  for  the  commercial  enterprises  concerned,  with  a 
view  either  to  winning  entire  equality  of  opportunity  or  else,  failing 
that,  to  bring  to  bear  counter  restrictions  of  an  analogous  character. 

The  Trend  of  the  Situation. — The  course  of  action  likely  to  be 
followed  by  the  major  powers  and  the  smaller  nationalities  in  respect 
to  petroleum  cannot  be  foreseen,  as  this  matter  is  involved  in  consid- 
erations of  foreign  and  domestic  policy  that  nowhere  seems  to  be 
settled,  complicated  as  the  situation  is  by  contending  factions,  con- 
flicting interests,  and  divergent  social  theories. 

The  forces  at  play  would  seem  to  fall  mainly  into  two  catagories : 
the  rivalry^  between  Great  Britain  and  the  United  States  in  seeking 
control  of  future  supphes;  and  the  perceptible  tendency  of  the 
smaller  independent  countries  to  recognize  the  value  of  petroleum 
and  restrict  the  exploitation  of  their  internal  deposits.  As  regards 
this  whole  matter,  the  widest  diversity  of  statement  has  been  given 


THE   TREND   OF   THE   SITUATION  319 

publicity  in  all  parts  of  the  world,  while  a  far-reaching  diplomatic 
and  commereial  game  has  been  played  behind  the  scenes. 

While  the  political  outcome  can  only  be  guessed  at,  the  economic 
result  will  undoubtedly  be  an  intensive  development  of  foreign  fields, 
with  the  utilization  of  much  of  the  output  for  some  years  to  come 
mainly  in  the  form  of  fuel  oil.  Barring  international  complications 
of  a  military  nature,  the  oil  production  will  presumably  become 
available  under  the  economic  laws  of  commerce  to  all  parts  of  the 
world  where  needed.  The  outstanding  issue  at  present  in  the  public 
eye  seems  to  be  the  matter  of  political  control,  predicated  in  the  last 
analysis  upon  commercial  and  military  strategy;  the  greater  need 
is  for  an  efficient  development  and  utilization  of  the  remaining 
deposits  in  order  that  automotive  transportation  and  industrial 
activity  the  world  over  may  be  sustained  and  developed. 

Whatever  happens,  the  United  States  faces  the  physical  fact  that 
the  supply  of  crude  petroleum  available  for  her  use  cannot  continue 
to  increase  volumetrically  at  the  rate  enjoyed  up  till  now.  The 
output  of  crude  petroleum  in  the  United  States  has  virtually  reached 
its  maximum;  the  proven  fields  of  Mexico  are  well-nigh  exhausted, 
and  a  marked  falling  off  in  imports  from  that  source  is  to  be  antici- 
pated; even  under  the  most  favorable  circumstances,  deposits  further 
afield  can  scarcely  be  developed  into  major  producers  under  five 
to  ten  years.  Cheap  and  bountiful  supplies  of  crude  petroleum 
will  soon  be  a  thing  of  the  past.  The  answer  to  the  domestic  petro- 
leum problem  does  not  lie  exclusively  abroad;  efficiency  in  produc- 
tion and  utilization  and  supplemental  sources  of  supply  at  home  must 
share  with  foreign  contributions  the  responsibility  of  sustaining 
those  activities  exclusively  dependent  upon  liquid  fuel. 


CHAPTER  XXV 
MEXICO  AS  A  SOURCE  OF  PETROLEUM 

The  unique  occurrence  of  petrcjleuni  in  Mexico  has  resulted  in  a 
rapid  and  sensational  depletion  of  the  resource,  and  a  widespread 
misconception  as  to  the  extent  and  future  of  its  deposits.  The  con- 
centration of  the  proven  oil  in  a  restricted  area  and  its  ready  suscep- 
tibility to  extraction  have  stimulated  an  intensive  campaign  of  devel- 
opment, which  has  succeeded  in  bringing  the  known  supplies  to  the 
verge  of  exhaustion  while  at  the  same  time  lending  a  false  sense  of 
confidence  in  the  magnitude  of  the  proven  reserve.  The  realiza- 
tion of  the  true  situation  is  likely  to  come  as  a  startling  climax  to  a 
period  of  flush  production,  like  the  termination  of  the  meteoric  career 
of  a  single  well.  For,  in  the  words  of  a  recent  speaker,  "  No  pump 
has  ever  profaned  the  casing  of  any  Mexican  well.  These  wells  are 
born  into  the  full  virility  of  their  gigantic  powers.  They  live  like 
giants,  straining  at  the  chains  that  bind  them,  and  they  die  as  giants 
should,  stricken  as  by  a  thunderbolt." 

Since  oil  was  commercially  developed  in  1901,  the  production 
of  Mexico  has  grown  until  that  countiy  has  become  second  only  to 
the  United  States  in  its  contribution  to  the  world's  supply.  First  a 
substantial  exporter  of  petroleum  in  1911,  Mexico  in  1920  shipped 
112  million  barrels  of  petroleum  to  the  United  States,  and  41 
million  barrels  to  other  countries — 28  per  cent  of  the  world's  entire 
output  in  that  year.  Already  the  United  States  is  dependent  upon 
Mexico  for  a  fifth  of  her  petroleum  requirements.  The  position  of 
Mexico  is  shown  graphically  in  Fig.  147  and  statistically  in  the  follow- 
ing tal)le  (Table  121). 

The  Oil-fields  of  Mexico. — Commercially  productive  deposits 
of  petroleum  are  found  in  a  narrow  strip  of  territory  in  the  Gulf 
coastal  plain  a  few  miles  inland  from  Tampico  and  Tuxpam.  This 
highly  restricted  area  is  responsible  for  practically  the  entire  output 
of  Mexican  petroleum  to  date,  and  is  the  region  to  which  reference  is 
generally  had  when  Mexican  petroleum  is  referred  to.  This  pro- 
ductive area  is  divided  into  two  fields:  the  Northern,  or  Panuco, 
field,  producing  a  heavy,  viscous  petroleum  of  10°-13°  Baum^ 
gravity;    and  the  Southern,  or  Light  Oil,  field,  producing  a  lighter 

320 


THE  OIL-FIELDS   OF   MEXICO 


321 


petroleum  of  19°-22°  Baume  gravity,  more  suitable  for  refining  than 
the  heavy  crude  of  the  Northern  field.  The  Northern  field  com- 
prises three  pools:  Ebano,  Panuco,  and  Topila.  The  Southern  field 
is  a  narrow,  sickle-shaped  area,  about  40  miles  long  and  half  a  mile 
broad,  containing  the  following  pools  from  north  to  south:  Dos 
Bocas;  Tepetate-Casiano-Chinampa;  Amatlan-Naranjos-Zacamixtle; 
Toteco-Cerro  Azul;  Alazan-Potrero  del  Llano;  Tierra  Blanca;  Alamo; 
and  Molino.  The  approximate  location  of  the  various  pools  is  shown 
in  Fig.  148.  Up  to  June  1,  1921,  the  Northern  Field  had  produced 
152  million  barrels,  and  the  Southern  Field  had  produced  492  million; 
while  the  current  daily  production  was  130,500  barrels  and  395,500 
barrels  respect  iveh'. 


Table  121. — Comparative  Production  of  Petroleum  in  Mexico 

(In,  miUinns  of  hari-el.'i) 


Year 

World's 

U.  S. 

Mexican 

Mexican 
Exports  to 

U.  S. 

Total  Mexican 

Production 

Production 

Production 

Exports 

1901 

167 

69.4 

0.01 

1902 

182 

88.8 

0.04 

1903 

195 

100 

0.08 

1904 

218 

117 

0.13 

1905 

215 

135 

0.25 

1906 

213 

126 

0.50 

1907 

264 

166 

1.01 

1908 

286 

179 

3.93 

1909 

299 

183 

2.71 

1910 

328 

210 

3.63 

1911 

344 

220 

12.6 

0.89 

1912 

352 

223 

16.6 

7.38 

7.62 

1913 

384 

248 

25.7 

17.  S 

20.9 

1914 

404 

266 

26.2 

16.2 

22.9 

1915 

428 

281 

32.9 

17.5 

24.3 

1916 

461 

301 

40.5 

20.1 

26.7 

1917 

507 

335 

55.3 

29.9 

42.5 

1918 

515 

356 

63.8 

40.8 

51.8 

1919 

558 

378 

92.4 

57.6 

77.7 

1920 

688 

443 

163 

112 

153 

Outside  of  the  territory  described  above,  there  are  many  areas 
which  will  doubtless  })ecome  commercially  productive  in  time,  but 
such  fields  nmst  first  be  prospected  and  developed.     A  clear  dis- 


322 


MEXICO  AS  A  SOURCE  OF  PETROLEUM 


tinction  should  be  drawn  between  the  proven  oil-jwols  already 
approaching  exhaustion,  and  the  undiscovered  and  the  undeveloped 
fields  of  the  Republic,  which  have  a  significance  that  the  future 
alone  can  disclose. 


Fig.  147. — Production  of  crude  petroleum  in  Mexico  compared  with  the  United 
States  and  all  other  countries  by  years,  1901-1920. 

Occurrence  of  Petroleum  in  Mexico. — In  the  Tampico-Tuxpam 
region  petroleum  occurs  under  highly  specialized  geological  conditions 
without  parallel  elsewhere.  The  oil  exists  in  cavernous  reservoirs 
"  under  such  conditions  of  enormous  pressure,  unrestricted  mobility, 
and  easy  availability,  as  to  enable  its  entire  withdrawal  from  any 
of  the  important  pools  within  a  few  months  under  the  intensive 


OCCURRENCE  OF  PETROLEUM  IN  MEXICO 


323 


development  campaign  which  has  raged  ...  in  the  Mexican  field." 
The  important  pools  are  found  to  contam  from  100  to  150  milKon 
barrels  of  oil  each;  from  the  Los  Naranjos  pool  in  1920  was  taken 
95  milhon  barrels,  or  two-thirds  of  its  probable  total  content. 

The  conditions  of  occurrence  give  rise  to  the  largest  producing 
weUs  in  the  world's  history,  both  as  to  the  volume  of  dailv  vield  and 


Fig.  148.^Skotc"h  map  showing  the  location  of  the  most  important  proven  oil 
pools  of  INIexico.     Many  of  the  pools  shown  are  extinct.     (See  text.) 

the  total  quantity  produced.  The  Mexican  wells  have  also  displayed 
the  peculiarity,  unknown  in  the  United  States,  of  continuing  to  yield 
by  their  own  pressure  in  undiminished  vohune  so  long  as  the  flow  of 
oil  lasts.  As  in  the  oil-fields  of  the  United  States,  the  end  of  pro- 
duction comes  through  the  inflow  of  water.     But  whereas  in  the 


324 


MEXICO    AS    A    SOURCE    OF    PETROLEUM 


United  States  the  water  nuw  be  edge  water,  bottom  water,  or  top 
water;  in  Mexico,  it  is  bottom  water  upon  which  the  oil  floats  under 
hydrostatic  pressure. 

The  size  of  the  Mexican  wells  has  led  to  optimistic  assumptions  as 
to  the  size  of  the  resource.  "  The  gusher  condition  in  ^lexico  seems 
to  indicate  ease  in  exploiting,  rather  than  such  abnormally  large 
pools  as  have  been  inferred  from  the  great  size  of  the  gushers  encoun- 
tered."! 

In  the  United  States,  oil  is  found  in  a  large  number  of  widely 
separated  pools,  occurring  in  porous  reservoir  rocks  under  such  con- 
ditions of  pressure,  mobility,  and  availability  as  to  preclude  its  with- 
drawal except  over  a  period  of  years,  ranging  up  to  forty  years,  but 
averaging  perhaps  fifteen  years.  The  output  of  an  oil-pool  in  the 
United  States  will  consequently  display  a  gradual  diminution  in  vol- 
ume. In  Mexico,  the  crowding  of  the  productive  pools  into  an 
exceedingl}^  small  area — all  the  important  pools  with  the  exception 
of  the  Panuco  group  occurring  in  one  long  narrow  structure — and 
the  concentration  of  the  oil  in  each  pool  into  an  interconnecting  series 
of  cavernous  openings  under  hydrostatic  head,  give  rise  to  an  imme- 
diate and  sensational  yield  once  the  concentration  is  tapped.  A 
production  that  in  the  United  States  would  be  gained  through  the 
agency  of  a  thousand  wells  is  achieved  under  Mexican  conditions  by 
a  half  dozen  wells,  or  even  a  single  well.  This  contrast  is  the  key 
to  the  situation.     It  is  clearly  shown  in  the  tabulation  following: 

Table  122. — Comparison  between  the  Production  of  Petroleum  in  Mexico 

AND  THE  United  States  at  the  End  of  1920 

(After  Ralph  Arnold) 


Country 

_             T,       '   Production 
Proven  Pro-  ,          ^^^O. 
ducmg  Area.     ^^              ^^ 

Sq.  Ml.       1       ._ 

Barrels 

Number 
Producing 
Wells,  1920 

Average 
Daily  Pro- 
duction per 
well,  1920, 

Barrels 

Proven  Oil 
Reserve, 

Millions  of 
Barrels 

Alexico 

25                   163                        200 

2600 
4.9 

300-400 
6000* 

United  States.  . .  . 

4500              443 

2.58,600 

*  From  U.  S    Geological  Survey. 

The  Salt  Water  Encroachment. — A  normal  oil-field,  such  as  those 
of  the  United  States,  enjoys  a  brief  period  of  flush  production,  fol- 
lowed by  a  period  of  settled  production  as  the  area  is  being  drilled  up, 
in  turn  succeeded  bj^  a  long  period  of  slow  decline  as  the  output  of  the 
individual  wells  gradually  dwindles.     The  abnormal  oil-field  of  the 

1  E.  De  Golyer,  Mexico  as  a  Source  of  Petroleum  and  Its  Products,  Society  of 
Automotive  Engineers,  Feb.,  1919,  p.  2. 


THE  UNMINED  RESERVE 


325 


300-400 


ZACAMIXTLE 


■■75':: 


CERRO  AZUL 


Tampico-Tuxpam  region  in  Mexico  is  displaying  the  wholly  distinct 
ive  characteristic  of  an  accelerating 
output  to  the  verge  of  exhaustion — its 
period  of  rapid,  flush  production  will 
represent  the  major  event  in  its  history. 
Its  decline  is  likely  to  be  sudden  and 
spectacular,  like  the  end  of  the  individ- 
ual well. 

The  salt  water,  which  underlies  the 
oil  and  supphes  the  hydraulic  pressure, 
is  rapidl}^  drowning  out  both  the  North- 
ern and  Southern  fields  of  the  Tampico- 
Tuxpam  area.  The  Dos  Bocas,  Tepetate, 
Casiano,Chinampa,and  Potrero  del  Llano 
pools  in  the  Southern  Field  were  extinct 
at  the  beginning  of  1921.  During  the 
early  months  of  1921,  the  Los  Naranjos, 
Panuco,  and  Alamo  pools  were  rapidly 
going  to  salt  water.  In  August,  the 
Amatlan  pool  became  seriously  affected. 
According  to  Arnold, "  Panuco  and  Ebano 
apparently  will  continue  for  many  years 
producing  enough  oil  and  a  valuable  mix- 
ture of  oil  and  water  to  have  an  impor- 
tant bearing  on  the  productivity  of  Mex- 
ico. This  leaves  Zacamixtle,  a  practically 
virgin  pool,  and  Cerro  Azul,  a  partly 
exhausted  pool,  the  latter  controlled 
by  a  single  company,  to  furnish,  with 
Panuco,  the  bulk  of  the  proven  future 
supply."  ^  Since  Arnold's  analysis  was 
made,  a  small  pool,  the  Tieri-a  Blanca, 
with  an  estimated  reserve  of  50  million 
barrels,  has  been  brought  in  near  the 
southern  extremity  of  the  Southern 
Field.2     (See  Fig.   148.) 

The  Unmined  Reserve. — The  oil  re- 
sources of  Mexico,  as  previously  noted, 
are  represented  by  the  proven  area  of 
the  Tampico-Tuxpam  region,  and  un- 

'  Ralph  Arnold,  The  oil  situation,  Mining  and  Metallurgj' 
pp. 20-21. 

2  See  L.  G.  Huntley  and  Stirling  Huntley,  Mexican  oil  fiel< 
Metallurgy,  Sept.,  1921,  pp.  27-32. 


LOS    NARANJOS 


FIGUHES   ARE    MILLIONS 
OF    BARRELS 

Fig.  149. — Estimated  unmined 
supply  of  crude  petroleum  in 
the  proven  oil-pools  of  Mexico 
on  .Jan.  1,  1921;  data  in  part 
from  Arnold. 

March,    1921, 
Mining  and 


326  MEXICO  AS  A  SOURCE  OF  PETROLEUM 

developed  territory  in  other  parts  of  the  country.  The  reserve 
available  in  the  proven  area  at  the  beoinning  of  1921  was  estimated 
by  Arnold  to  approximate  300  to  400  million  barrels.  The  allot- 
ment of  this  reserve  to  the  unexhausted  pools  is  shown  in  Fig. 
149.  Estimates  by  other  geologists  differ  in  detail  from  Arnold's 
figures,  but  give  the  same  order  of  magnitude  for  the  oil  definitely 
in  sight. ^  Outside  of  the  proven  area,  there  is  as  yet  no  sub- 
stantial basis  for  estimating  the  probable  underground  .  supply 
of  petroleum;  considerable  prospective  territory  is  known  and 
development  work  will  doubtless  bring  other  pools  and  fields  into 
action. 

The  output  of  Mexican  petroleum  is  probably  due  for  a  slowing 
down  in  the  period  immediately  ahead.  If  the  rate  of  production 
of  eai'ly  1921  is  sustained,  1922  may  see  the  end  of  the  proven 
big  fields  of  Mexico.  On  the  other  hand,  special  conditions  may  lead 
to  a  reduced  rate  of  output  earlier  and  a  consequent  spread  of 
the  remaining  supply  over  a  period  of  years.  In  either  event, 
new  productive  pools,  either  in  the  Tampico-Tuxpam  area  or 
elsewhere  in  Mexico,  can  scarcely  be  developed  with  sufficient 
celerity  to  maintain  an  unbroken  increase  in  that  country's  produc- 
tion of  petroleum. 

Character  of  Mexican  Petroleum.- — Most  of  the  light  crude 
produced  in  the  Southern  field  is  topped,  with  the  production  of 
about  12  per  cent  gasoline,  5  per  cent  kerosene,  81  per  cent  fuel  oil, 
and  2  per  cent  loss.  Some  of  this  oil,  however,  is  completely  refined, 
yielding  15  per  cent  gasoline,  7  per  cent  kerosene,  28  per  cent  gas  oil, 
25  per  cent  light  lubricating  distillate,  10  per  cent  heavj^  lubricating 
distillate,  and  15  per  cent  gas  and  coke. 

The  heavy  crude  of  the  Northern  field  contains  so  little  gasoline 
that  its  flash  point  is  low  enough  to  permit  its  use  as  fuel  oil  without 

1  Huntley  and  Huntley  (Mining  and  Metallurgy,  Sept.,  1921,  p.  30)  give  the 
following  estimate  of  the  known  reserves : 

Barrels 

Amatlan-Zacamixtle 50,000,000 

Cerro  Azul-Toteco 150,000,000 

Tierra  Blanca 50,000,000 

Panuco  River  pools  (have  not  been  limited 
and  seem  capable  of  considerable  exten- 
sion) .  ? 
Total 250,000,000 

"These  amounts  disregard  later  recoveries  from  the  same  areas  through 
stripping  wells,  as  the  factor  used  in  the  calculations  was  derived  from  the  data 
in  the  Tepetate-Chinampa  area,  which  excludes  later  recoveries." 

2  See  G.  A.  Burrell,  Oil  &  Gas  Journal,  January  30,  1920,  p.  66. 


MEXICAN   LAWS  AFFECTING   OIL  DEVELOPMENT 


327 


refining.  When  topped,  this  crude  yields  3.5  per  cent  gasoline,  4 
per  cent  kerosene,  90.5  per  cent  fuel  oil,  and  2  per  cent  loss;  the  fuel 
oil  fraction  so  obtained,  however,  is  so  viscous  that  only  about  2.5-3 
per  cent  gasoline  is  usually  removed.  Upon  more  complete  refining, 
the  heavy  Mexican  crude  can  be  made  to  yield  3.5  per  cent  gasoline, 
4.5  per  cent  kerosene,  17  per  cent  gas  oil,  5  per  cent  lubricating  oil, 
65  per  cent  asphalt,  and  5  per  cent  loss. 

Typical  juclds  from  Mexican  crude  are  shown  in  Fig.  150. 

TOPPING    PLANT        COMPLETE    REFINERY         TOPPING   PLANT  COMPLETE    REFINERY 


LIGHT  CRUDE 


LIGHT   CRUDE 


HEAVY   CRUDE 


GASOLINE 


-.KEBOSENE; 


^81^> 


i/y^;i-i-// 

-LIGRTf-LU^BR., 


^1? 


HE4VcYoL'UB.Fb 
o  (DISTILLATE  o 
oooqo^poo  o 

o  OOP  o  6  oooo 


WAX    1.3r. 

GAS   He'  COKE 

|'i';ii:|||,13:7:'/f,!i|,;Hjii 

iiliiililllliliiliililllllillnllllli 


GASOLINE     3?,;; 


•  'kerosene'  4^; 


^GASOLINE    3.5S 


.kerosene;  4;  55;; 


'~  >L  Jp  Rl  ciri  N  0"A  I  f-', 


ASFH 

5 


JpsSlp>); 

ii"ii""iiiiii"i 


Fig.   150. — Chart  showing  the  average  yields  from  Mexican  petroleum;    data 

from  G.  A.  Burrell. 


Mexican  Laws  Affecting  Oil  Development.' — Wide  publicity  has 
been  given  the  Mexican  laws  affecting  oil  development,  and  many 
conflicting  statements  are  to  be  found  on  this  subject.  The  mining 
laws  of  1884,  1892  and  1909,  based  on  the  Constitution  of  1857, 
"  recognized  the  principle  that  the  exclusive  ownership  of  the  petro- 
leum deposits  was  vested  in  the  owner  of  the  land,"^  and  provided 
for  the  acquisition  of  petroleum  rights  by  foreign  companies. 

In  1917  a  new  constitution  was  promulgated,  based  on  the  old 
land  laws,  which  made  a  radical  change  in  the  petroleum  legislation 

'  See  The  Petroleum  Industry  in  Mexico,  Commerce  Reports,  September  13, 
1920,  p.  1224. 


328  MEXICO  AS  A  SOURCE  OF  PETROLEUM 

of  the  Republic.  As  Article  27  of  this  constitution  has  met  with 
active  objection  on  the  part  of  some  of  the  foreign  interests,  a  portion 
of  the  famous  article  is  accordingl^v  given  below,  following  the 
translation  published  by  the  Latin-American  Division  of  the  U.  S. 
Bureau  of  Foreign  and  Domestic  Commerce: 

Translation   of  a   Part   of  Article   27   of  the   Mexican 

constitutiox 

The  ownership  of  lands  and  waters  within  the  limits  of  the  national 
territory  is  vested  originally  in  the  nation,  which  has  had  and  has  the 
right  to  transmit  title  thereof  to  private  persons,  thereby  constitut- 
ing private  property. 

Private  property  shall  not  be  expropriated  except  for  cause  of 
public  utility  and  by  means  of  indemnification. 

The  nation  shall  have  at  all  times  the  right  to  im]:)ose  on  private 
property  such  limitations  as  the  public  interest  may  demand,  as  well 
as  the  right  to  regulate  the  development  of  natural  resources,  which 
are  susceptible  of  appropriation,  in  order  to  conserve  them  and 
equitably  to  distribute  the  public  wealth.  In  the  nation  is  vested 
direct  ownership  of  all  minerals,  petroleum,  and  hydrocarbons — 
solid,  liquid,  or  gaseous. 

Legal  capacity  to  acquire  ownership  of  lands  and  waters  of  the 
nation  shall  be  governed  by  the  following  provisions: 

L  Onlj^  Mexicans  bj'  })irth  or  naturalization  and  Mexican  com- 
panies have  the  right  to  acquire  ownership  in  lands,  waters  and  their 
appurtenances,  or  to  obtain  concessions  to  develop  mines,  waters,  or 
mineral  fuels  in  the  Republic  of  Mexico.  The  nation  may  grant 
the  same  right  to  foreigners,  provided  they  agree  before  the  depart- 
ment of  foreign  affairs  to  be  considered  Mexicans  in  respect  to  such 
property,  and,  accordingly,  not  to  invoke  the  protection  of  their  gov- 
ernments in  respect  to  the  same,  under  penalty  in  case  of  breach,  of 
forfeiture  to  the  nation  of  property  so  acquired.  Within  a  zone  of 
100  kilometers  (62.14  miles)  from  the  frontiers  and  of  50  kilometers 
(31.07)  miles  from  the  seacoast  no  foreigner  shall  under  any  con- 
ditions acquire  direct  ownership  of  lands  and  waters. 

Article  14  of  the  new  constitution  states:  "  No  law  shall  be  given 
retroactive  effect  to  the  prejudice  of  any  person  whatsoever."  It  is 
the  contention  of  the  Mexican  Government  that  this  constitutional 
provision  will  fuUy  protect  the  companies  ah'eady  legitimately  inter- 
ested in  the  petroleum  industry  in  Mexico.^  Many  of  the  companies, 
however,  have  objected  to  the  provision  of  the  new  constitution,  and 
the  matter  has  been  brought  under  diplomatic  consideration  by  the 
two  countries. 

Taxation    of  Mexican  Petroleum.- — Prior    to   May,    1917,  the 

1  Commerce  Reports,  September  1.3,  1920,  p.  26. 

-  For  a  scientific  discussion  of  the  taxation  problem  in  respect  to  Mexican 
petroleum  see  V.  R.  Garfias,  General  Notes  on  the  Production,  Marine  Trans- 


TAXATION  OF  MEXICAN  PETROLEUM 


329 


exports  of  Mexican  petroleum  were  taxed  approximately  3.9  U.  S. 
cents  per  barrel.  From  May,  1917,  to  July,  1921,  a  so-called  stamp 
tax  was  levied  upon  outgoing  oil  by  a  decree  established  under 
President  Carranza.  The  amount  of  this  stamp  tax  was  approxi- 
mately as  follows:  heavy  crude,  5  cents  per  barrel;  hght  crude, 
11  cents  per  barrel;  fuel  oil,  9  cents  per  barrel;  and  crude  gasoline, 
56  cents  per  barrel,  or  1^  cents  per  gallon.  In  addition  to  the  stamp 
tax  which  applied  exclusively  to  petroleum  there  were  minor  taxes 
common  to  all  exports,  such  as  bar  dues  running  from  |  to  f  of  a  cent 
per  barrel,  and  the  Infalsificable,  or  paper  redemption  tax.  These 
minor  taxes  for  petroleum  were  small,  compared  with  the  stamp  tax 
as  given  above. 

On  July  1,  1921,  a  special  tax  supplanted  the  stamp  tax,  which 
had  been  in  force  from  May  1,  1917  to  June  30,  1921.  This  special 
tax  differed  from  the  superseded  stamp  tax  in  two  main  particulars: 
the  basis  of  valuation  was  changed  from  that  of  the  values  of  Mexican 
oils  in  Mexican  harbors  to  the  basis  of  the  average  values  of  similar 
products  in  the  United  States,  the  Mexican  Treasury  establishing 
monthly  basic  figures;  and  the  special  tax  was  based  upon  volume 
rather  than  weight.  On  June  7,  1921,  a  presidential  decree  insti- 
tuted an  additional  tax,  an  export  tax  on  petroleum  and  its  products, 
also  to  take  effect  upon  July  1,  1921. ^  This  tax  was  not  ad  valorem, 
but  was  fixed  in  amount.  The  total  taxes  applicable  to  exports  of 
Mexican  petroleum  in  July,  1921,  are  summarized  in  the  following 
table : 

Table   123. — Total  Mexican  Taxes  on  Petroleum  and  its  Products  i:; 

Force  in  July,  1921 
Data  from  V.  R.  Garfias 
(l7i  U.  S.  cents  per  hnrrel) 


Special  Tax 

Infalsifi- 
cable 

Bar 
Dues 

Export  Tax 

Total  Taxes 

Light  crude,       20°  Be. 
Heavy  crude,     12°  Be. 
Fuel  oil,              16°  Be. 
Crude  gasoline,  56°  Be. 

13.000 
8.800 
11.558 
52.46 

1.300 

.880 

1 . 1.50 

5.246 

.740 

.782 
.760 
.  597 

19.873 
12 . 322 
15.899 
74.723 

34.913 

22.784 

29. 372 

i:«.026* 

*  In  U.  S.  cents  per  gallon — 3.167.3. 


portation  and  Taxation  of  Mexican  Oils,  Amer.  Inst.  Min.  and  Met.  Eng.,  Pub. 
1054,  Feb.,  1921.  Also  Additional  Notes  on  the  Ta.xtion  of  Mexican  Petroleum. 
(Advance  copy  supplied  author  in  Aug.,  1921,  by  courtesy  of  V.  R.  Garfias.) 
The  data  following  are  based  upon  the  papers  of  Garfias. 

'The  collection  of  the  export  tax  was  subsequently  deferred  until  Dec.  1921. 


CHAPTER  XXVI 

THE   RELATION    OF   THE   COAL   INDUSTRY   TO    THE    OIL 

INDUSTRY 

Coal  and  Oil  Now  Competitors. — Under  present  conditions  coal, 
the  dominant  solid  fuel,  and  fuel  oil,  the  major  component  of  crude 
petroleum,  are  competitors.  This  competition  has  attracted  wide 
interest;^  and  in  many  quarters  the  belief  has  been  expressed  that 
serious  inroads  will  be  made  upon  the  coal  industry  by  virtue  of 
the  superior  convenience  and  efficiency  of  oil  fuel.  As  a  matter  of 
fact,  however,  petroleum  cannot  be  expected  to  radically  displace 
coal  in  industry  and  transportation,  since  a  crude  petroleum  pro- 
duction of  about  3  billion  barrels  per  year  would  be  necessary  to  drive 
coal  from  its  present  ascendancy. 

Oil  Becoming  More  Specialized. — Substitution  of  fuel  oil  for  coal 
marks  merely  an  era  of  crude  overproduction  in  respect  to  balanced 
demands.  For  many  years  the  oil-fields  of  the  United  States  have 
supplied  crude  petroleum  in  excess  of  the  higher  requirements  of  the 
market,  with  the  result  that  the  surplus  in  the  form  of  fuel  oil  was 
forced  to  find  an  outlet  in  competition  with  coal.  For  the  future, 
however,  fuel  oil  will  represent  a  narrowing  percentage  of  the  crude 
petroleum  mined,  since  the  more  specialized  uses — automotive 
power,  lubrication,  chemical  by-products — are  coming  into  growing 
importance  and  are  registering  their  claims  ahead  of  the  demand  for 
industrial  fuel.  Not  only  has  the  rate  of  crude  production  in  this 
country  long  been  lagging  behind  the  growth  of  these  specialized 
demands,  but  the  latter  are  due  for  further  increases  in  the  future, 
while  the  crude  output  has  virtually  reached  its  maximum.  This 
cross-purpose  relation  between  supply  and  demand,  though  latent 
in  1921,  has  created  a  problem  which  is  now  generally  recognized. 
The  current  answer  to  this  problem  is  reflected  in  the  present  activi- 
ties in  the  direction  of  developing  foreign  oil-fields.  The  complete 
answer,  however,  goes  much  deeper  and  involves  foreign  develop- 
ments linked  with  intensive  research,  both  material  and  economic, 
for  the  creation  of  new  technology.  The  latter  aspect  of  the  matter 
is  yet  uncultivated,  and  offers  an  outstanding  opportunity  for 
advance.  Coal  represents  one  of  the  most  potent  directions  from 
which  oil  can  gain  rehef  from  the  limitations  of  a  waning  resource. 

330 


A   COAL   REFINING   INDUSTRY   DEVELOPING  331 

Coal  Becoming  More  Generalized. — At  the  same  time  tliat  oil  is 
gradually  becoming  restricted  to  a  highly  specialized  field  of  service, 
and  is  seeking  new  sources  of  raw  material  to  cover  even  this  latitude, 
coal  is  undergoing  an  evolution  almost  as  rapid  in  an  opposite  direc- 
tion. With  no  comparable  resource  limitation,  coal  is  being  forced 
by  economic  restrictions  of  a  different  order  to  seek  new  directions 
of  application,  with  the  correlative  freeing  of  potential  by-products 
which  must  find  new  outlets.  Oil  is  seeking  new  sources  of  supply; 
coal  is  seeking  new  types  of  demand. 

These  two  trends  in  conjunction  bid  fair  to  bear  important  fruit  in 
the  future.  Changes  in  oil  will  require  supporting  resources.  Changes 
in  coal  will  requne  new  outlets.  In  view  of  this  circumstance,  it  is 
important  to  analyze  the  coal  situation  in  regard  to  its  imminent 
changes,  and  to  appraise  the  bearing  that  these  changes  are  likely 
to  have  upon  the  oil  situation. 

A  Coal  Refining  Industry  Developing.^ — Just  as  the  production  of 
crude  petroleum  gave  rise  to  a  petroleum  refining  industry  which  has 
come  to  treat  most  of  the  crude  petroleum  produced,  so  likewise 
coal  is  attaching  to  itself  a  refining  activity  which  will  eventually 
involve  a  significant  proportion  of  the  crude  coal  mined,  thus  dis- 
placing raw  coal  with  coal  products.  Progress  toward  a  refining 
industry  on  the  part  of  coal  is  generally  conceded;  the  speed  and 
character  of  the  evolution  only  is  open  to  question.  The  advance  of 
petroleum  in  this  direction  was  rapid,  thanks  to  the  insistent  charac- 
ter of  the  demands  created  by  the  phenomenal  growth  of  automotive 
transportation.  The  progress  of  coal  in  this  direction  has  been  slow, 
due  to  the  large  supply  of  raw  material  available,  the  presence  of 
anthracite  coal  in  the  East,  and  the  general  neglect  that  has  been 
accorded  this  whole  matter.  Coal  refining,  however,  has  already 
involved  half  of  the  coke  industry  and  a  small  fraction  of  the  manu- 
factured-gas  industry;  or,  in  terms  of  bituminous  coal  produced, 
around  8  per  cent  is  now  refined  before  utilization. 

There  is  much  evidence  to  indicate  that  many  conditions  are 
shaping  up — even  outside  the  range  of  oil — which  will  accelerate 
changes  in  coal  and  bring  important  developments  into  view.  These 
changes  may  be  expected  to  take  place  first  in  the  various  sub- 
industries  using  raw  coal,  such  as  the  coke  industry,  the  gas  industry, 
and  the  ])ower-pro(lu('tion  industry. 

The  Coke  Industry  as  a  Source  of  Oil. — The  refining  of  coal  to 
date  has  taken  place  largely  within  the  confines  of  the  metallurgical 
coke  industry.     Roughly  one-sixth  of  the  bituminous  coal  produced 

1  For  further  details,  consult  Gilbert  and  Pogue,  America's  Power  Resources, 
New  York,  1921,  pp.  184-213. 


332         RELATION  OF  COAL  INDUSTRY  TO  OIL  INDUSTRY 

in  this  country  is  converted  into  coke  and  of  this  quantity  approxi- 
mately one-half  is  treated  with  by-product  recovery,  that  is  to  say, 
refined.  In  connection  with  this  by-product  treatment  which  involves 
about  40  million  tons  of  coal,  around  13  million  barrels  of  benzol, 
light  oils,  and  tar  are  annually  produced.  The  potential  yield  of  the 
entire  coke  industry,  therefore,  once  by-i:)roduct  practice  has  trans- 
gressed the  whole  field,  is  around  25  million  Ijarrels  of  oil  products  on 
the  present  basis  of  technology. 

But  it  must  be  remembered  that  such  yields  of  oil  products  arise 
incidentally  from  a  process  in  which  the  focus  is  upon  the  production 
of  coke.  There  are  probabilities  of  strikingly  increased  yields  of 
oil  when  it  becomes  important  to  force  this  phase  of  the  output  and 
requisite  new  technology  is  developed  to  this  end. 

The  Gas  Industry  as  a  Source  of  Oil. — The  gas  industry,  as  now 
constituted,  is  an  insignificant  source  of  oil  products,  since  this 
industry  consumes  only  about  5  million  tons  of  bituminous  coal, 
slightly  more  than  1  per  cent  of  the  country's  total  consumption. 
There  are  potentialities  of  importance  attached  to  the  gas  industry, 
however,  in  the  possibility  of  its  expansion  to  serve  the  fuel  needs  of 
communities,  in  the  necessity  of  its  growth  to  replace  the  waning 
supply  of  natural  gas,  and  in  connection  with  coal-mine  generation 
of  power  which  may  develop  in  part  along  lines  of  by-product  gasi- 
fication. Such  changes,  moreover,  may  be  forced  rather  rapidly 
by  the  rising  prices  of  coal,  the  increasing  dirtiness  of  cities  lacking 
smokeless  fuel,  not  to  mention  the  growing  needs  for  the  oil  by- 
products which  will  thus  be  made  available.  It  is  advisable,  there- 
fore, to  take  a  rough  measure  of  what  these  potentialities  hold  forth 
in  the  way  of  augmenting  the  supply  of  oil. 

Municipal  Fuel  Plants  a  Coming  Development. — It  is  technically 
feasible  for  the  gas  industry,  which  now  supplies  a  small  part  of  the 
comnmnity's  requirements,  to  expand  to  the  point  of.  filling  the  total 
fuel  needs  of  the  community.  Developments  of  this  nature,  in  fact, 
are  already  afoot  and  are  progressing  more  rapidly  than  is  generally 
appreciated;  the  movement  will  be  greatly  facilitated  upon  a  public 
and  mimicipal  awakening  to  the  real  possibilities  of  the  matter. 

At  present  around  300  million  tons  of  bituminous  coal  are  used 
for  domestic  and  industrial  purposes.  Assuming  that  one-third  of 
this  portion  is  utilized  in  populous  centers,  by-product  gasification 
of  this  portion  under  present  technology  will  yield  around  25  million 
barrels  of  oil  products.  New  technology  holds  the  possibility  of 
expanding  this  output  to  50-100  million  barrels. 

It  is  thus  seen  that  a  proper  utilization  of  coal  in  our  cities,  which 
is  bound  to   come,   holds   the   possibility   of   contributing   a   highly 


CENTRALIZED   POWER   PLANTS  333 

significant  quantity  of  crude  oils  for  the  use  of  the  oil-refining 
industry. 

Effects  of  Waning  Natural  Gas  Supply. — The  United  States  at 
present  is  consuming  around  600  billion  cubic  feet  of  natural  gas, 
largely  in  the  populous  region  of  Indiana,  Ohio,  West  Virginia,  Penn- 
sylvania, and  Western  New  York.  A  tremendous  investment  in 
capital  and  equipment  has  been  provided  to  meet  this  function. 
The  supply  of  natural  gas  is  conspicuously  on  the  wane,  and  if  the 
investment  in  the  natural  gas  industiy  is  not  to  be  lost,  artificial 
gas  must  be  developed  to  supplement  the  natural-gas  supply.  In 
point  of  fact,  the  replacement  of  natural  gas  by  artificial  gas  is 
rapidly  taking  place.  There  is  a  conspicuous  trend  in  the  natural- 
gas  industry  for  the  upgrowth  of  coal  gasification  plants,  and  this 
tendency  may  be  expected  to  increase  in  the  future.  This  whole 
trend  ties  in  with  the  possible  upgrowth  of  municipal  fuel  plants, 
and  in  itself  forms  an  miportant  accelerating  motive  for  the 
rapid  development  of  bj'-product  gasification  of  coal.  It  may  be 
noted  further  that  certain  oil  companies  involved  now  in  the  pro- 
duction of  natural  gas  will  inevitably  find  themselves  engaged  more 
and  more  in  the  by-product  utilization  of  coal,  thus  bridging  the  gap 
which  now  intervenes  l^etween  coal  and  oil. 

Centralized  Power  Plants. — The  burden  that  coal  imposes  upon 
the  railroads  of  the  country  (over  one-third  of  our  freight  is  coal) 
and  the  inability  of  our  industries  to  expand  rapidly,  or  beyond  certain 
limits,  under  this  burden,  are  two  factors  that  are  forcing  a  steady 
drift  toward  central  power  plants  near  the  mine  mouth  for  the 
extraction  of  energy  from  coal.  The  initial  tendency  in  this  direc- 
tion of  course  derives  its  pattern  from  the  hydroelectric  development, 
and  coal-field  generation  of  electricity  is  already  a  reality. 

There  are  serious  economic  obstacles,  however,  to  the  centralized 
conversion  of  coal  into  electric  power  through  the  medium  of  steam, 
involved  in  the  loss  of  the  exhaust  heat  (made  use  of  in  distributive 
plants)  and  the  failure  to  recover  the  by-products.  These  two  objec- 
tions, tempered  somewhat  by  the  course  of  balance  between  the 
efficiency  of  the  steam  turbine  and  the  large  gas-engine  installation, 
will  force  more  and  more  consideration  to  by-product  gasification  of 
the  coal  as  the  intermediate  step  in  the  energy  extraction.  As  this 
gasification  step  gains  ground  in  engineering  and  economic  practice, 
aided  by  the  growing  technology  stimulated  by  the  needs  of  the 
municipal  fuel  plant,  the  ultimate  procedure  of  gas  transmission  as 
an  alternative  to  electric  transmission  will  come  into  being.  Already 
in  fact,  some  engineers  are  inclined  to  see  under  some  conditions 
greater  ultimate  economy  in  this  direction  than  in  connection  with 


334  RELATION  OF  COAL  INDUSTRY  TO  OIL  INDUSTRY 

the  electric  transmission  of  power.  This  whole  matter  links  sig- 
nificantly with  the  needs  of  the  natm'al  gas  situation,  the  two  together 
forming  a  strong  probability  that  eventually  this  country  will  see  a 
more  extensive  network  of  gas  transmission  lines  than  is  now  char- 
acteristic of  the  territories  served  Ijy  natural  gas. 

Centralized  power  plants,  which  may  develop  rather  quickly  in 
response  to  the  needs  of  transportation,  if  for  no  other  reason,  may 
come  to  involve  as  much  as  100  million  tons  of  coal,  giving  the  pos- 
sibility of  an  additional  oil  supply  of  some  25  million  barrels  under 
present  practice,  with  an  eventuality  of  50-100  million  barrels  under 
new  technolog^^ 

While  quantitative  estimates  of  the  kind  noted  above  are  sub- 
ject to  many  uncertainties  it  is  apparent  that  there  are  three  devel- 
opments under  way  within  the  coal  situation,  each  of  which  holds 
some  promise  of  contributing  oil  products  to  the  maximum  of  50-100 
million  barrels,  or  a  total  of  150-300  million  barrels.  With  all  due 
qualifications  in  mind,  it  is  apparent  that  such  potentialities  are 
sufRcioiitly  significant  to  be  accorded  serious  attention. 

The  Solution  of  the  Peak-load  Problem. — One  of  the  most  per- 
plexing problems  in  the  way  of  cheap  and  efficient  heat  and  power  is 
the  variable  and  seasonal  character  of  demand,  requiring  excess 
equipment  to  care  for  the  peak  load.  Such  is  notoriovisly  the  case  in 
public  utility  plants  and  central  power  stations,  and  few  subjects 
have  received  more  attention  from  engineers  than  this  matter. 
The  possibilities  of  a  technological  process  that  will  permit  a  variable 
proportion  of  oil  and  gas  to  be  made  from  coal  would  be  so  great  in 
the  direction  of  solving  the  peak-loak  problem  as  to  give  an  acceler- 
ating impetus  to  the  municipal  fuel  plant,  the  central  power  plant, 
and  the  whole  matter  of  by-product  gasification  of  coal.  So  great  is 
the  need  for  such  an  outcome  that  this  develo]iment  may  be  ulti- 
mately expected.  A  process  othenvise  economically  sound,  which 
has  the  added  advantage  of  meeting  the  peak-load  issue,  would 
have  value  so  outstandingly  ob\dous  as  to  require  no  additional 
emphasis. 

Oil  from  Coal  Versus  Oil  from  Shale. — An  economic  analysis  of 
the  coal  industiy,  with  reference  to  the  changes  that  are  coming, 
leads  to  the  conclusion  that  oils  from  coal  may  rank  in  importance 
with  shale  oil.  In  many  respects,  coal  deposits  hold  greater  imme- 
diate possibilities  than  do  the  bulk  of  the  shale  deposits. 

Oil-shale  is  oil-forming  material  diffused  through  clay.  Coal  is 
oil-forming  material  diffused  through  carbon.  The  richest  oil-shales 
occur  in  the  West.  Coal,  on  the  other  hand,  is  found  in  the  heart 
of  our  populous  industrial  section;   in  fact,  our  populous  industrial 


SOLID  FUEL  ULTIMATELY  OBSOLETE  335 

section  is  such  because  of  the  presence  of  coal.  Oil-shale  has  the 
possibility  of  yielding  a  barrel  of  oil  and  20-30  pounds  of  ammoniuni 
sulphate  per  ton  of  shale,  the  residue  being  for  the  most  part 
worthless.  Coal  has  the  possibility  of  yielding  upwards  of  a  barrel 
of  oil  and  20-30  pounds  of  ammonium  sulphate  per  ton  of  raw 
material,  the  residue  being  fuel  more  valuable  than  the  raw  coal. 

Solid  Fuel  Ultimately  Obsolete  as  a  Dominant  Form. — Fuel  in 
liquid  and  gaseous  form  holds  such  advantages  in  the  way  of  con- 
venience and  efficiency  that  the  use  of  solid  fuel  may  be  expected  to 
be  gradually  relegated  to  second  place. ^  The  tendency  will  be  to 
convert  more  and  more  of  the  raw  coal  produced  into  gas  and  oils 
along  the  lines  laid  down  above.  As  the  matter  now  stands,  the 
utilization  of  raw  coal  is  so  ill-fitted  to  the  needs  of  modern  indus- 
triahsm  that  the  changes  outhned  are  bound  to  come  in  growing 
degree. 

The  crude  petroleum  situation  requires  supplementary  resources. 
Foreign  supplies  are  unable  fully  to  meet  this  need.  Attention  is 
consequently  already  focusing  upon  domestic  supplements.  Oil 
products  from  coal  represent  a  raw  material  source  of  great  future 
unportance.  Developments  coming  in  the  coal  industry  hold  the 
possibility  of  contributing  highly  significant  quantities  of  oil  products, 
and  the  coal  resources  of  the  country  represent  a  source  of  oil  that 
will  >'ield  a  rich  reward  upon  proper  cultivation. 

1  For  a  discussion  of  form  value  see:  C.  G.  Gilbert  and  J.  E.  Pogue.,  Form 
Value  of  Energy  in  Relation  to  Its  Production,  Transportation,  and  Application, 
Jour.  Am.  Soc.  Mech.  Eng.,  January,  1921,  pp.  26-28. 


CHAPTER  XXVII 
OIL-SHALE 

Before  pstroleum  was  discovered  in  the  United  States,  a  small 
quantity  of  oil  was  produced  by  the  distillation  of  a  volatile  type  of 
bituminous  coal  called  cannel.  From  the  crude  oil  so  obtained,  a 
product  suitable  for  illumination  was  manufactured.  Thus  there 
was  a  coal-oil  industiy  in  this  countiy  antedating  the  petroleum 
industry. 

When  flowing  w^ells  of  petroleum  were  developed,  the  coal-refining 
industry'  found  it  impossible  to  compete  with  the  natural  product; 
and  it  was  not  long  before  the  petroleum  industry  held  undisputed 
sway  in  the  production  of  liquid  fuels.  All  that  was  left  of  the  early 
commercial  efforts  to  win  oil  from  solid  bituminous  matter  was  the 
term  coal-oil,  which  came  to  be  erroneously  applied  to  illuminating 
oils  of  petroleum  origin,  and  is  even  so  used  to-day.  The  bount}-  of 
nature  supplanted  the  ingenuity  of  man;  the  lavish  flow  of  petroleum 
from  the  earth  cut  short  the  growth  of  coal-refining  for  over  a  half 
century. 

Of  late  years,  again,  the  production  of  oils  from  bituminous  min- 
erals has  come  to  the  fore,  but  this  time  the  chief  interest  is  focused 
upon  bituminous  shales,  products  which  are  related  to  the  cannel 
coals  but  leaner  in  volatile,  oil-forming  components.  The  revival 
of  the  "  rock-oil  "  industry  is  coming  from  a  new  and  unexpected 
quarter.  Work  conducted  by  the  U.  S.  Geological  Sm^ey  in  1913 
called  attention  to  extensive  shale-oil  deposits  in  Colorado,  Utah, 
and  Wyoming,  where  hundreds  of  square  miles  were  found  to  be 
underlain  by  beds  of  bituminous  shale,  much  of  it  capable  of  yielding 
upon  distillation  upwards  of  1  barrel  of  oil  to  the  ton.  Since  that 
time,  the  growing  inadequacy  of  domestic  petroleum  to  support 
the  demands  it  has  created  has  been  gradually  turning  commercial 
attention  not  only  to  the  Rocky  Moimtain  deposits  but  to  oil-yielding 
shales  and  coals  in  many  other  parts  of  the  countiy,  but  the  industrial 
efforts  in  respect  to  these  leaner  sources  of  oil  supply  are  still  feeling 
their  way  in  an  attempt  to  sound  the  possibilities  in  the  new  direc- 
tions.    The  w^hole  movement  has  hkewise  been  seized  upon  by  pro- 

336 


CHARACTER  OF  OIL-SHALES  337 

moting  and  stock-selling  undertakings  and  through  these  avenues  the 
matter  has  been  widely  advertised  to  the  general  public. 

Character  of  Oil-shales. — Oil-shales  are  dark-colored,  sedunentaiy 
strata,  consisting  of  a  dense  matrix  of  clay  more  or  less  saturated 
with  organic  materials  resulting  from  the  decomposition  of  plant 
and  animal  remains.  Oil-shales  vary  considerably  in  the  quantity 
of  organic  matter  present,  and  with  increasing  proportions  of  the 
latter  they  grade  into  the  cannel  coals.  Both  the  oil-shales  and  the 
cannel  coals  are  distinguished  by  the  presence  of  considerable  hydro- 
gen, which  combines  with  the  carbon  upon  the  application  of  heat 
and  hence  enables  these  products  to  yield  hydrocarbon  oils  reseml)ling 
petroleum  when  they  are  subjected  to  distillation.  Nitrogen  is  also 
present  in  variable  quantity,  yielding  a  valuable  commodity  when 
extracted  but  interposing  difficulties  in  its  recovery.  The  cannel 
coals,  in  turn,  through  a  diminution  in  hydrogen  content,  grade  into 
the  bituminous  coals.  Thus,  in  a  general  sense,  oil-shales  are  related 
to  the  coal-series,  and  may  be  regarded  as  hydrogen-rich  semi-coals 
so  diluted  with  mineral  matter  as  to  be  without  usefulness  in  their 
raw  state  as  fuel. 

Distribution  of  Oil-shales. — Lean  bituminous  shales  are  very 
common  and  widely  distributed,  but  the  richer  varieties,  hke  the 
cannel  coals,  are  much  more  restricted  in  occurrence.  Enormous 
tonnages  of  rich  shale,  in  relatively  thick  beds  underljang  hundreds 
of  square  miles,  occur  in  the  Green  River  formation  of  northwestern 
Colorado,  northeastern  Utah,  and  southwestern  Wyoming.  These 
deposits  have  attracted  considerable  attention,  and  the  richer  and 
more  accessible  portions  in  Colorado  and  Utah  have  already  been 
the  scene  of  much  activity  in  the  private  acquisition  of  territory 
and  the  establishment  of  experimental  plants  for  the  extraction  of 
the  oil.  At  Grand  Valley  and  Debeque  in  Colorado,  the  efforts  have 
been  particularly  active. 

In  many  other  parts  of  the  West,  but  especially  in  Nevada,  Mon- 
tana, and  California,  deposits  of  oil-shales  have  been  studied  and 
experimental  work  done.  At  Elko,  Nevada,  a  small-scale  commercial 
shale-oil  plant  has  been  placed  in  operation,  with  a  daily  output  of 
100  barrels  of  crude  oil.^  In  Montana  oil-shales  have  been  found  m 
association  with  phosphate  deposits. 

Further  east  are  extensive  deposits  of  leaner  oil-shales,  imde"lying 
considerable  portions  of  the  states  of  Texas,  Wisconsin,  Indiana, 
Kentucky,  Pennsylvania,  and  New  York.  In  many  localities  in  the 
East,  the  shales,  while  apparently  leaner  in  oil-potentiality  than  the 

'  V.  C.  Alderson,  The  Oil-shale  Industry  in  1920,  Combustion,  March,  1921, 
p.  31. 


338  OIL-SHALE 

Western  deposits,  enjoy  an  intimate  association  with  other  mineral 
deposits,  such  as  coal  beds,  phosphate  deposits,  cement  materials, 
limestones,  and  others,  thus  affording  possibilities  of  a  coordinated 
extraction  of  values. 

Foreign  Developments  of  Shale  Oil. — The  development  of  a 
domestic  shale-oil  industry  has  been  stimulated  by  the  commercial 
production  of  shale  oil  abroad,  but  the  economic  and  technical 
peculiarities  of  the  foreign  activities  have  not  apparently  l:»cen  fully 
apprehended  in  this  country'.  The  commercial  success  attained 
in  Scotland  has  been  generally  drawn  upon  as  a  criterion  of  what  may 
be  accomplished  in  the  United  States. 

The  Scottish  oil-shales  differ  from  those  in  the  United  States  by 
containing,  roughly  speaking,  about  half  the  oil  and  twice  the  recov- 
erable nitrogen.  In  Scotland,  therefore,  the  industry  has  been 
developed  on  the  basis  of  nitrogen  recovery,  the  oil  being  virtually 
a  by-product.  The  Scottish  technology  has  been  strongly  colored 
by  this  relation.  The  shale  under  Scotch  practice  is  treated  in 
vertical  retorts,  in  the  upper  part  of  which  the  product  is  heated 
gently  with  the  expulsion  of  the  oil  and  in  the  lower  part  raised  to 
much  higher  temperatures  and  treated  with  steam  for  the  extraction 
of  the  nitrogen.  The  shale  now  retorted  in  Scotland  yields  about  25 
gallons  of  oil  and  36  pounds  of  ammonium  sulphate  to  the  ton.^ 
The  crude  shale  oil  so  obtained  yields  a  somewhat  similar  range  of 
products  to  those  made  from  petroleum,  but  in  different  proportions 
and  with  a  far  higher  percentage  of  loss.  The  percentage  yield  from 
one  of  the  commercial  plants  in  Scotland  is  shown  in  the  table  fol- 
lowing: 

Table  124. — ^Percentage  Yields  from  Crude  Shale  Oil  in  a  Commercial 

Plant  in  Scotland 

(Data  from  U.  S.  Bureau  of  Mines) 


Products 

Percentage  Yield 

9.9 

24.7 

24.4 

6.6 

9.5 

24.9 

Lubricating  oil  flow  viscosity) 

Wax                         

Loss  (including  still  coke  2  per  cent) 

Total               

100.0 

1  For  a  description  of  Scottish  practice,  see  Gavin,  Hill,  and  Perdew,  Notes  on 
the  Oil-shale  Industry,  U.  S.  Bureau  of  Mines,  1919. 


AMERICAN   DEVELOPMENT  OF  OIL  SHALE  339 

It  will  be  observed  that  the  gasoline  recovery  is  low,  the  j^ield 
of  lubricants  is  small  and  of  the  less  desii'able  type  (non-viscous) ,  and 
the  losses  notably  high. 

The  shale-oil  industry  in  Scotland  has  achieved  commercial  suc- 
cess as  a  whole,  but  in  its  development  the  majority  of  the  individual 
efforts  met  with  financial  failure,  and  only  a  few  large,  well-organized 
companies  sui-vived.  At  no  time  could  the  industry  have  been  sup- 
ported by  the  oil-yield  alone,  nor  under  the  conditions  of  oil-prices 
that  prevailed  in  the  United  States.  The  Scottish  experience,  both 
technical  and  economic,  may  be  applied  to  conditions  in  this  countiy 
only  with  the  utmost  caution. 

Oil-shales  are  known  in  many  other  parts  of  the  world,  and  some 
have  received  more  or  less  commercial  attention  such  as  those  in 
France  and  New  Zealand,  but  nowhere  outside  of  Scotland  has  a 
sustained  industiy  developed. 

American  Development  of  Oil-shale. — During  the  past  five  years 
an  oil-shale  industry  has  been  developing  in  the  United  States,  but 
thus  far  the  activity  is  still  in  its  formative  period,  and  no  substantial 
output  of  oil  has  come  upon  the  market.  The  difficulties,  both 
technical  and  economic,  in  the  way  of  such  an  upgrow^th,  under  the 
stimulus  of  dissociated  and  opportunistic  efforts,  are  indeed  imposing. 
Progress  is  gradually  being  made,  largely  as  a  result  of  trial  and 
error,  but  the  outcome  as  yet  is  by  no  means  clear.  The  technology 
requisite  to  the  retorting  of  the  American  shales  is  still  in  an  experi- 
mental stage,  with  a  large  number  of  partly  developed  processes  in 
the  field;  while  the  refining  of  the  resulting  crude  shale  oil  is  still 
largely  an  unknown  quantity.  Again,  the  whole  matter  of  handling 
and  marketing  the  products,  in  order  to  bring  them  into  the  channels 
of  trade,  remains  to  be  worked  out. 

On  the  other  hand,  the  stimulus  toward  shale-oil  production 
remains  yet  to  be  felt  in  its  full  intensity  .^  As  soon  as  the  suppty 
of  crude  petroleum  falls  sufficiently  short  of  requirements  to  bring  a 
permanently  higher  price-level  into  the  field,  the  economic  oppor- 
tunities for  the  profitable  production  of  oil  from  shales  and  coals 
will  be  considerafjly  enlarged  at  the  same  time  that  commercial 
enterprise  will  be  brought  to  a  more  rigorous  development  of  the 
whole  matter  of  supplemental  oils. 

The  Prospects  Ahead. — From  the  point  of  view  of  those  inter- 
ested, or  becoming  interested,  in  the  commercial  exploitation  of  oil- 
shales,  there  is  no  question  but  that  deposits  of  this  substance  in  the 
aggregate  represent  an  untapped  reserve  of  crude  oil  veiy  many 

'  See  Gilbert  and  Pogue,  The  Energy  Resources  of  the  United  States,  Bull. 
102,  Vol.  I,  Smithsonian  Institution,  1919,  pp.  77-81. 


340  OIL-SHALE 

times  greater  than  the  available  supply  of  petroleum.  There  is  no 
doubt,  also,  of  the  immediate  desiiabilit}^  of  supplementing  the 
developed  sources  of  petroleum  supply  with  oils  from  new  directions. 
Thus  far  there  has  been  no  economic  room  for  commercially  exploiting 
the  leaner  oil  resources  of  the  countr>%  for  oil  requirements  could  be 
met  by  the  flow  of  petroleum  from  domestic  wells  and  such  easily 
accessible  foreign  deposits  as  those  of  Mexico.  The  opportunity 
for  such  developments  lying  ahead  would  seem  to  be  predicated  upon 
the  further  course  of  miported  petroleums,  since  domestic  petroleum 
has  already  fallen  short.  If  foreign  petroleums  are  quickly  and 
cheaply  made  available  to  the  United  States,  the  opportunity  for 
leaner  resources  will  be  deferred  for  another  period.  But  foreign 
oil  deposits  cannot  apparently  be  quickly  tapped  nor  so  developed 
as  to  yield  a  sustained  supply  of  crude  petroleum  to  this  country  at 
anything  approaching  the  price-level  prevailing  in  the  past.  The 
development  of  supplemental  oils  would  therefore  seem  to  be  an 
early  necessity. 

As  to  the  precise  course  this  development  will  follow,  the  answer 
is  not  so  clear.  Attention  so  far  in  this  country  has  been  largely 
confined  to  the  possibilities  of  exploiting  the  Western  shale  deposits 
for  the  production  of  oil  alone.  The  potentialities  of  the  Central  and 
Eastern  shales  in  respect  to  the  coordinate  extraction  of  a  range  of 
values  in  addition  to  oil  have  been  accorded  subordinate  attention, 
in  spite  too  of  the  greater  accessibility  to  markets  enjoyed  by 
these  deposits.  Likewise,  the  relationship  of  oil-shale  to  the  cannel 
and  other  high-volatUe  coals  (coals  which  have  been  termed  gas-coals 
but  which  may  come  to  be  termed  oil-coals),  has  not  been  adequatety 
emphasized;  nor  the  correlation  of  this  matter  with  the  low-grade, 
high-volatile  lignites. 

By-product  Oils  from  Oil-shales  and  Oil-coals. — As  the  need  for 
supplemental  sources  of  oil  becomes  more  insistent,  industrial  efforts 
will  be  redoubled  and  commercial  results  will  be  forthcoming.  A 
growing  output  of  crude  oil  will  doubtless  be  realized  from  Western 
shale  deposits,  but  by-product  oils  from  Eastern  shale-beds  worked 
in  conjunction  with  associated  mineral  values  and  from  high-volatile 
coals  and  lignites  subjected  to  refining  may  also  be  expected  to  come 
into  growing,  if  not  superior,  prominence.  In  this  event,  the  oil- 
shale  industry  as  a  whole  wUl  develop  less  along  the  lines  of  a  dis- 
tinctive single-product  activity  such  as  the  production  of  crude 
petroleum  now  is,  and  more  in  the  direction  of  a  complex  chemical 
industry',  on  the  one  hand  involving  the  extraction  of  coordinate 
values  with  oil  as  a  joint-product  or  even  a  by-product,  and  on  the 
other  hand  merging  with  the  output  of  bj'-products  from  the  refining 


BY-PRODUCT  OILS  FROM   OIL-SHALES  341 

of  the  oil-coals  such  as  lignites,  cannels,  and  the  high- volatile  bitumi- 
nous coals. 

At  best,  however,  the  attainment  of  substantial  results  involves  an 
important  consideration  of  time.  The  requisite  efforts  can  scarcely 
be  expected  to  be  put  forth  until  the  exigencies  of  economic  pressure 
force  the  issue.  While  such  a  time  may  not  be  far  distant,  new  indus- 
tries based  upon  new  technology  and  a  revolution  in  economic  prac- 
tice cannot  grow  with  celerity  to  the  magnitude  required  without 
the  lapse  of  j^ears,  if  not  decades.  In  the  meanthne  the  oil-shales 
and  the  oil-coals  as  well  will  come  increasingly  under  requisition, 
with  the  odds  in  favor  of  those  activities  proceeding  with  due  regard 
to  both  the  phj^sical  and  chemical  aspects  of  the  principle  of  multiple 
production. 


CHAPTER  XXVIII 
FULL  UTILIZATION  OF  PETROLEUM 

A  VAST  amount  of  discussion  has  been  devoted  to  the  prodigal 
manner  in  which  the  natural  resources  of  the  United  States  have  been 
developed,  and  petroleum  has  come  in  for  no  small  share  of  attention 
in  this  respect.  The  small  proportion  of  the  original  oil  in  the 
ground  that  ultimatel}^  performs  a  useful  sei-vice  to  society  has  fre- 
quently been  pointed  to  as  a  measure  of  the  wastefulness  that  char- 
acterized the  exploitation  of  this  resource.  Just  what  constitutes 
waste,  however,  is  an  uncertain  matter,  depending  veiy  much  upon 
what  is  assumed  to  be  the  criterion  against  which  performance  may 
be  measured.  American  petroleum  has  been  brought  into  service 
at  a  tremendous  cost  of  the  oil  itself,  but  a  rapid  industrial  growth  and 
a  low  capital  expenditure  have  been  gained  in  return.  We  have  paid 
in  oil  for  the  speed  with  which  the  present  volume  of  production  has 
been  attained  and  for  the  relatively  low  level  of  prices  we  have 
enjoyed  during  that  attainment.  The  magnitude  of  the  expendi- 
ture may  turn  out  to  be  a  false  economy-,  and  many  are  already  inclined 
to  designate  it  so,  but  American  economic  practice  elected  this  pro- 
cedure and  it  is  idle  to  speculate  upon  the  desirability  of  results  which 
cannot  be  changed. 

The  tune  has  come,  how^ever,  when  the  methods  of  the  past  can 
no  longer  be  followed;  the  oil  remaining  is  not  sufficiently  bountiful 
to  support  its  use  for  other  pui-jooses  than  as  a  source  of  material 
energy  and  chemical  products.  The  accumulating  pressure  in  this 
du'ection  is  already  indicated  by  the  rapidly  growing  capital  require- 
ments of  the  petroleum  inclustiy.  From  now  on,  the  tendency  will  be 
to  use  relatively  less  of  the  material  itself,  but  to  put  greater  effort 
in  the  service-value  extracted  from  it. 

The  limitations  in  resource  size  are  accordingly  beginning  to 
dictate  a  fuller  utHization  of  petroleum,  while  at  the  same  time  calling 
attention  to  the  methods  that  are  available  for  stretching  the  remain- 
ing volume  of  supply  over  a  greater  area  of  service.  Under  the  new 
conditions,  therefore,  a  criterion  of  efficiency  is  afforded  and  it 
becomes  a  matter  of  practical  importance  to  measure  the  existing 
slack  which  may  be  taken  up  between  supply  and  demand  before  a 
true  shortage  intervenes. 

The  course  of  the  oil  supply  depends  upon  the  attainments  in  three 

342 


EFFICIENCY  OF  PRODUCTION  343 

directions:  the  foreign  output  that  ma}^  be  developed  or  directed 
into  the  domestic  market;  the  supplemental  sources  of  suppty  that 
may  be  brought  into  action;  and  the  degree  to  which  the  overall 
efficiency  of  petroleum  may  be  increased.  Growing  attention  will 
of  necessity  be  devoted  to  all  three  avenues,  for  the  utmost  that 
may  be  expected  from  the  combined  effort  will  scarcely  prove  too 
much  in  view  of  the  requirements  of  the  future. 

The  outlook  for  foreign  developments  and  supplemental  sources 
of  supply  has  been  reviewed  in  previous  chapters.  The  possibihties 
of  improvement  in  respect  to  the  production,  transportation,  refining, 
and  utilization  of  petroleum  may  now  be  briefly  appraised. 

Efficiency  of  Production. — In  the  search  for  oil-bearing  territory 
in  the  United  States,  much  of  the  work  of  exploration  is  done  by  the 
individual  wildcatter,  who  frequently  sinks  his  well  with  inadequate 
justification  of  finding  oil.  Lacking  in  organization  and  engineering 
practice,  this  method  leads  to  a  notable  waste  of  labor  and  materials, 
besides  opening  up  new  territory  with  inadequate  adjustment  to 
transportation  facilities  or  market  demand.  The  science  of  geolog^'^ 
has  multiplied  bj'  a  large  factor  the  chance  of  striking  oil,  but  much 
of  the  work  of  exploration  is  still  conducted  without  geological  advice. 
It  has  been  calculated  b}'  the  president  of  one  of  the  large  Mid- 
Continent  producing  companies,  from  extensive  records  of  the  com- 
pany, that  85  per  cent  of  the  wells  located  on  the  basis  of  careful 
geological  surveys  turned  out  to  be  productive,  whereas  only  5  per 
cent  of  the  wells  located  at  random  were  successful.  Engineering 
exploration,  now  used  almost  exclusively  in  the  search  for  foreign 
oil-pools,  has  a  growing  field  of  application  in  this  country. 

The  development  of  the  oil-bearing  territory,  following  its  loca- 
tion, is  subject  to  conditions  that  usually  lead  to  extensive  under- 
ground losses.  Most  of  the  oil-field  operations  in  the  United  States 
are  conducted  by  large  numbers  of  rival  interests.  The  individual- 
istic and  highly  competitive  type  of  production  thus  mduced  is 
markedly  diiTerent  from  that  obtaining  in  most  other  mining  opera- 
tions, and  is  responsible  for  a  racing,  unorganized  extraction  of  the  oil 
which  leads  to  a  tremendous  sacrifice  of  values.  This  kind  of  activity 
is  especially  characteristic  of  new  fields  where  boom  conditions  and 
checkerboard  holdings  are  prevalent.  Under  such  conditions,  an 
excessive  numl^er  of  wells  arc  drilled  resulting  in  needless  expenditures 
amounting  to  millions  of  dollars;  more  or  less  uncoordinated  drilling 
prevails,  leadmg  to  uncontrolled  underground  movements  of  asso- 
ciated gas  and  water,  with  the  loss  of  untold  quantities  of  oil  and 
natural  gas  which  are  thus  put  for  all  time  beyond  the  reach  of 
extraction;   and  finally,  when  the  field  is  abandoned,  over  one-half 


34^  FULL  UTILIZATION  OF  PETROLEUM 

of  the  oil  is  left  underground,  still  clinging  to  the  pores  of  the  oil 
sands. 

For  many  years  the  U.  S.  Bureau  of  Mines  has  studied  the  vital 
problem  of  unrecovered  oil,  and  has  recently  expressed  the  opinion 
that  the  best  evidence  seems  to  indicate  that  only  from  10  to  20  per 
cent  of  the  oil  underground  is  now  being  recovered.^  It  is  the  belief 
of  the  engineers  of  the  Bureau  of  Mines,  based  upon  what  has  been 
accomplished  in  some  of  the  older  fields  by  water-flooding  and  by  the 
use  of  compressed  air,  that  after  a  field  has  been  brought  to  the 
point  of  abandonment,  we  should  often  be  able  by  improved  methods 
to  recover  half  as  much  oil  again  as  was  originally  produced. 

While  the  heaviest  losses  on  the  part  of  oil  are  sustained  under- 
gi'ound  as  the  inevitable  result  of  the  destructive  effects  of  competitive 
drilling  of  the  field,  losses  due  to  inadequate  methods  of  handling 
the  product  when  it  reaches  the  surface  are  far  more  sensational 
because  open  to  observation.  Surface  losses  are  greatest  in  new 
fields  and  arise  generally  from  the  fact  that  production  is  forced  in 
advance  of  preparations  for  handling  and  storing  the  output.  As  a 
result,  some  of  the  oil  escapes  any  capture  whatsoever,  sinking  into 
the  earth  or  flowing  down  streams;  great  quantities  of  the  lighter 
and  more  valuable  components  of  the  oil  pass  into  the  atmosphere 
through  evaporation;  while  fires  are  responsible  for  another  heavy 
toll  of  these  valuable  products.  Even  with  adequate  storage  facilities, 
losses  from  evaporation  are  usually  notable,  and  in  many  fields  large 
quantities  of  residues  and  oil-water  emulsions  are  made  no  use  of 
whatsoever.  Enormous  volumes  of  natural  gas  are  usually  pro- 
duced along  with  the  oil,  and  in  the  absence  of  an  adequate  demand 
for  this  product,  much  of  the  output  is  allowed  to  escape  into  the 
atmosphere. 

The  Bureau  of  Mines  has  recently  called  attention  to  the  magni- 
tude of  the  losses  resulting  from  the  evaporation  of  gasoline  from  crude 
petroleum  while  in  storage.  Careful  investigations  have  disclosed 
that  in  many  cases  20  per  cent  of  the  gasoline  content  of  the  crude  oil 
is  being  lost  by  evaporation  before  it  reaches  the  refinery,  and  that 
probably  one-half  of  this  loss  may  be  economically  saved  by  more 
careful  attention  to  conditions  of  storage  and  handling. 

On  the  whole  a  low  recovery  factor  characterizes  the  production  of 
petroleum  under  the  conditions  that  have  prevailed  in  this  country. 
Technical  means  are  available  for  notably  increasing  the  efficiency 
of  extraction,  but  the  handicap  of  competitive  conditions  working  at 
cross  purposes  with  the  occurrence  of  oil  still  obtains.     A  funda- 

^  J.  O.  Lewis:  Our  Future  Supplies  of  Petroleum  Products;  address  before 
Independent  Oil  Men's  Association  Convention,  Denver,  September  29,  1920. 


EFFICIENCY  IN  TRANSPORTATION  345 

mental  improvement  in  oil  production  may  call  for  far-reaching 
changes  in  economic  practice. 

Efficiency  in  Transportation. — Crude  petroleum  is  transported 
in  the  main  through  an  extensive  system  of  pipe-hnes  supplemented 
by  coastwise  movements  in  tank-steamers.  This  distinctive  mode  of 
transportation  is  an  outstanding  feature  of  the  petroleum  industiy 
and  represents  a  high  attainment  in  respect  to  efficiency.  Some 
losses  of  oil,  however,  take  place  thi'ough  evaporation  and  leakage, 
approximating  1  per  cent  in  the  gathering  lines  and  1  per  cent  in  the 
trunk  lines,  according  to  investigations  made  by  the  U.  S.  Bureau  of 
Mines  in  the  Mid-Continent  Field.  Lack  of  transportation  facilities 
in  newly  developed  territoiy  is  a  potent  cause  of  losses  by  necessitating 
the  accumulation  of  oil  in  the  field  in  excess  of  adequate  storage 
facilities. 

Petroleum  products  are  shipped  in  bulk  in  tank-cars,  and  con- 
siderable evaporation  losses  take  place  in  respect  to  the  lighter 
products.  In  the  most  carefully  l)uilt  but  non-insulated  tank-car 
with  dome  cover  and  safety  valve  fitting  tight  and  accurately, 
gasoline  may  evaporate  to  the  extent  of  5-6  per  cent  in  a 
six-day  trip "  in  summer.  An  insulated  tank-car  has  been  de- 
veloped to  take  care  of  this  condition;  its  wider  use  would 
lead  to  notable  economies,  for  the  small  losses  assume  imposing 
proportions  when  multiplied  by  the  billions  of  gallons  of  volatile 
products  affected. 

Refinery  Efficiency. — Petroleum  refining,  in  general,  falls  short 
of  the  efficiency  attained  in  many  chemically  controlled  indus- 
tries. Much  of  the  crude  run  to  stills  is  merely  skimmed  of  its  lighter 
components,  all  else  being  left  as  a  residual  fuel  oil.  The  failure  to 
fully  refine  even  the  bulk  of  the  crude  petroleum  brought  into  use 
entails  a  tremendous  economic  loss,  which  grows  'out  of  a  lack  of 
balance  between  the  several  major  demands  and  the  crude  supply. 
On  the  physical  side,  the  segregation  of  the  products  is  not  sharply 
defined,  so  that  in  many  cases  a  portion  of  the  more  valual^le  products 
ai'c  marketed  with  the  less  valuable.  Statistics  gathered  by  the 
U.  S.  Bureau  of  Mines  for  several  years  indicate  that  about  4  per  cent 
of  the  oil  run  to  stills  is  unrecovered  in  the  form  of  products.  Part  of 
this  loss  is  inevitable,  but  a  portion  may  be  eliminated  by  more 
efficient  installations.  Much  of  the  loss  represents  gasoline  vapor, 
and  it  has  been  estimated  by  the  Bureau  of  INIines  that  recovery  in 
this  respect  to  the  extent  of  2  per  cent  of  the  crude  produced  could  be 
attained.^ 

'  E.  W.  Dean,  Status  of  Refinery  Practice  with  Reg;ard  to  Gasoline  Pro- 
duction, Society  of  Automotive  Engineers,  February  6,  1919. 


346  FULL  UTILIZATION  OF  PETROLEUM 

Efficiency  in  the  Utilization  of  Petroleum  Products. — In  the 
utilization  of  some  of  the  products  of  petroleum  there  are  losses 
arising  from  the  inefficiency  of  the  appliances  involved  which  offer 
important  fields  for  improvement.  The  most  outstanding  oppor- 
tunity for  increased  efficiency  in  utilization  applies  to  gasoline,  which 
must  be  more  effectively  employed  to  meet  the  mounting  require- 
ments in  this  field.  During  the  war  the  Bureau  of  Mines  estimated 
that  a])proximately  9  per  cent  of  the  gasoline  consumed  in  the  United 
States  was  wasted  because  of  carelessness  in  its  handling.  A  recent 
investigation  of  exhaust  gases  undertaken  by  the  Bureau  of  Mines 
in  connection  with  the  Hudson  River  Vehicular  Tunnel  Vjrought  forth 
the  significant  fact  that  the  combustil^le  gas  in  the  average  automo- 
bile exhaust  contains  nearly  30  per  cent  of  the  heat  of  the  original 
gasoline.^  The  great  majority  of  passenger  cars  and  trucks  are 
operated  on  rich  mLxtures  suitable  for  maximum  power  but  verj' 
wasteful  from  the  standpoint  of  gasoline  economy.  Careful  car- 
buretor adjustment  alone  would  result  in  a  saving  in  the  country's 
annual  gasoline  consumption  of  upwards  of  15  per  cent,  or  600 
million  gallons. 

To  the  loss  arising  from  careless  operation  must  'be  added  the 
greater  one  resulting  from  the  low  fuel  economy  attained  by  the 
average  automobile  engine.  In  the  words  of  a  leading  automotive 
engineer:  "  The  ordinar}^  engine  running  around  the  streets  of  New 
York  has  a  thermal  efficiency  of  from  5  to  10  per  cent.  ...  I  think 
that  in  five  or  ten  years  from  now  it  will  be  common  practice  to  secure 
in  the  neighborhood  of  35  or  40  per  cent  thermal  efficiency."  ^  This 
conclusion,  which  is  concurred  in  by  many  automotive  engineers, 
indicates  that  a  mileage  of  from  30  to  50  miles  a  gallon  should  be  the 
ideal  toward  which  both  the  public  and  the  engine  designer  should 
look. 

In  addition  to  the  added  mileage,  and,  in  consequence,  the  greater 
service  that  may  be  won  from  gasoline,  it  is  also  possible  to  adapt 
the  automotive  engine  and  equipment  to  the  use  of  less  volatile  fuel, 
which  will  permit  the  enlargement  of  the  motor  fuel  supply  on  the 
part  of  the  refiner.  The  requirements  of  automotive  transportation 
are  growing  so  rapidly  that  a  supply  of  motor-fuel  can  be  assured 
for  future  years  only  by  giving  the  utmost  attention,  not  only  to 
economy  of  operation,  but  also  to  the  more  difficult  problem  of  mod- 
ifying the  engine,  the  character  of  the  fuel,  or  both,  so  as  to  permit 

^  Fieldncr,  Straub,  and  Jones,  Automobile  Exhaust  Gases  and  Vehicular- 
tunnel  Ventilation,  Jour.  Soc.  Aut.  Eng.,  April,  1921,  pp.  29.5-30.5. 

-  C.  F.  Kettering,  More  Efficient  Utilization  of  Fuel,  Society  of  Automotive 
Engineers,  New  York,  February  6,  1919. 


EFFICIENCY   IN   UTILIZATION   OF   PETROLEUM  347 

the  maximum  enlargement  in  the  fuel  supply.  This  issue  was 
first  brought  to  the  concerted  attention  of  the  automotive  industry 
and  the  oil  industry  by  the  Oil  Division  of  the  Fuel  Administration  in 
1919,  and  since  that  time  there  has  been  progress  toward  cooperation 
between  the  producers  of  motor-fuel  and  the  manufacturers  of  motors. 
The  problem  of  coordinating  engine  and  fuel  is  thought  by  manj^ 
engineers  to  represent  one  of  the  most  important  issues  now  occupying 
the  field  of  automotive  transportation.  The  automotive  engine  in 
current  use  to-day  is  out  of  adjustment  with  the  fuel  supply  and  while 
marked  adaptations  upon  the  part  of  the  engine  are  coming  into 
evidence,  the  need  is  for  a  closer  parallelism  between  the  development 
of  engine  and  fuel  than  has  yet  been  attained. 

Fuel  oil  is  not  only  the  cheapest  of  the  main  petroleum  products, 
but  it  is  also  the  one  used  in  greatest  bulk.  Because  of  low  cost  and 
the  rapid  expansion  in  its  consumption,  it  is  for  the  most  part  very 
inefficiently  utilized.  The  Bureau  of  Mines,  in  a  Handbook  by 
James  M.  Wadsworth  entitled  "  Efficiency  in  the  Use  of  Oil  Fuel," 
issued  in  October,  1918,  estimated  that  out  of  160  million  barrels  of 
fuel  oil  burned  in  the  United  States  in  1917,  at  least  40  million  barrels 
or  one-fourth  of  the  total  "  might  have  been  saved  by  more  intelligent 
operation  of  plant  and  proper  firing."  There  is  little  reason  to  be- 
lieve that  the  efficiency  of  utilization  has  increased  materially 
since  this  appraisal  was  made,  and  if  oil  is  to  be  employed  for  fuel 
purposes,  it  should  be  used  efficiently  within  this  range  of  ap- 
plication. 

In  addition  to  the  losses  occurring  in  the  actual  use  of  fuel  oil, 
there  is  an  even  greater  economic  loss  involved  in  the  fact  that  over 
two-thirds  of  the  fuel  oil  consumed  is  burned  under  boilers  for  steam 
raising,  a  method  of  utilization  which  extracts  a  minimum  of  value 
from  the  product,  but  which  is  nevertheless  profitable  to  the  con- 
sumer so  long  as  the  price  of  fuel  oil  is  low.  This  sort  of  utilization 
is  not  generally  regarded  as  a  loss,  but  the  fact  remains  that  a 
product  capable  of  highly  specialized  applications  is  now  devoted 
to  the  crudest  of  uses.  With  the  development  and  widespread  use 
of  the  Diesel  and  semi-Diesel  type  of  internal  combustion  engine 
in  the  place  of  the  oil-fired  steam  engine,  the  service  gained  from 
fuel  oil  may  be  doubled  or  trebled. 

The  outstanding  feature  of  the  fuel-oil  situation  of  late  is  the 
rapid  manner  in  which  the  requirements  of  trans^iortation — automo- 
tive and  marine — are  encroaching  ui)on  the  supjily  and  competing 
with  the  uses  which  have  thus  far  exclusively  occupied  the  field.  The 
rapid  conversion  of  tlic  navies  and  merchant  marines  of  the  woild 
to  an  oil-fired  basis,  and  the  growth  of  gasoline  requu-emcnts  in 


348  FULL  UTILIZATION  OF  PETROLEUM 

excess  of  the  production  of  natural  gasoline,  are  forcing  a  diversion 
of  fuel  oil  from  its  industrial  role  to  the  rank  of  marine  and  motor 
fuel.  With  such  rapidity  has  this  diversion  come  about  that  accus- 
tomed channels  of  flow  have  suffered  reduction  and  certain  industries, 
such  as  the  gas  industry,  have  met  with  difficulty  in  obtaining  their 
accustomed  quotas.  The  elevation  of  fuel  oil,  and  its  light  variety, 
gas  oil,  to  higher  economic  levels,  however,  is  a  matter  to  be  encour- 
aged. Although  commercially  a  single  product  at  the  present  time, 
fuel  oil  is  fundamentally  a  mixture  of  wax,  asphalt,  lubricating  oil 
and  motor-fuel.  Just  as  it  is  now  an  economic  perversion  to  })urn 
crude  petroleum  in  its  raw  condition,  so  it  will  soon  become  uneconomic 
to  utilize  fuel  oil  in  its  present  composite  form.  It  is  only  a  matter 
of  time  when  fuel  oil  will  be  refined  into  its  components  and  thus 
utilized,  but  that  time  should  be  hastened  by  appreciation  of  the 
true  values  contained  in  this  product  and  concerted  efforts  toward 
winning  these  values  therefrom. 

Of  all  the  petroleum  products,  lubricants  are  fundamentally 
the  inost  essential,  for  they  support  modern  industrialism  and  their 
use  cannot  be  dispensed  with.  In  addition  to  the  fact  that  millions 
of  barrels  of  potential  lubricating  oils  are  burned  annually  in  the 
United  States  in  the  form  of  fuel  oil,  the  application  of  lubricating 
oils  is  in  many  instances  far  from  scientific.  In  many  installations  it 
has  been  estimated  that  the  needless  losses  arising  from  imperfect 
or  faulty  lubrication  run  from  10  to  50  per  cent  of  the  power  con- 
sumed. If  we  visualize  for  a  moment  the  vast  quantities  of  coal  and 
hydroelectric  energy  brought  into  service  in  the  United  States,  and 
bear  in  mind  that  a  large  part  is  devoted  to  the  overcoming  of  friction, 
we  gain  an  adequate  idea  of  the  importance  of  lubricants  as  conservers 
of  energy. 

A  lubricating  problem  of  no  small  importance  has  developed  of 
recent  years  as  a  result  of  the  change  in  the  character  of  motor-fuel 
induced  by  the  mounting  demands  for  this  product.  Because  of 
the  lessened  volatility  of  fuel  on  the  one  hand,  and  the  slow  adap- 
tation of  the  engine  to  this  circumstance  on  the  other,  the  life  of 
lubricants  in  the  automotive  engine  has  been  lessened  through 
crank-case  dilution.  This  matter  is  an  example  of  a  faulty  develop- 
ment which  could  have  been  prevented  in  advance  more  easily  than 
it  may  be  corrected  in  the  present. 

The  Natural-gas  Analogy. — It  is  desirable  to  review  the  natural- 
gas  situation  in  the  United  States  since  this  product  illustrates  a 
resource  closely  associated  with  petroleum,  which  has  been  brought 
to  the  verge  of  exhaustion  by  rapid  and  hasty  methods  of  exploitation 
and  whose  future  would  seem  to  be  largely  dependent  upon  the 


THE   NATURAL   GAS  ANALOGY  349 

extent  to  which  constructive  and  enhghtened  conservation  measures 
are  brought  to  bear  upon  the  prolongation  of  its  life. 

The  production  of  natural  gas  reached  its  peak  in  1917  with  a 
marketed  output  of  nearly  800  billion  cubic  feet,  and  since  that  time 
the  production  has  been  rapidly  declining,  with  an  estimated  output 
in  1920  of  less  than  650  billion  cubic  feet.  It  is  a  serious  matter 
when  the  production  of  an  essential  commodity  serving  directly 
over  one-tenth  of  our  population  has  entered  upon  a  waning  course. 

In  1917-1918  the  Oil  Division  of  the  Fuel  Administration  was 
faced  with  the  necessity  of  dealing  with  the  critical  natural-gas  con- 
ditions that  were  already  displaying  serious  results.  On  the  basis 
of  extensive  engineering  data  it  was  estimated  that  the  common 
methods  of  producing,  transporting,  and  using  natural  gas  have 
resulted  in  losing  more  gas  than  has  ever  been  brought  into  useful 
service.  A  report  made  by  S.  S.  Wyer  to  the  Fuel  Administration 
indicated  that  the  loss  of  natural  gas  to-day  is  greater  than  the  quan- 
tity of  gas  actually  utilized.  Man,  with  all  his  skill,  has  never  been 
able  to  make  a  commercial  gas  equal  in  quality  to  the  natural  gas 
now  so  lavishly  and  carelessly  used.  Natural  gas  has  previously 
been  so  abundant  in  this  countiy,  and  so  little  value  has  been  placed 
upon  its  use,  that  the  product  has  been  carelessly  and  shamefully 
misused.  Wj'er,  whose  work  on  natural-gas  conservation,  both  in 
the  Fuel  Administration  and  subsequently,  turned  so  much  light  on 
what  may  be  accomplished  by  effective  conservation  measures,  has 
recently  stated:  "  .  .  .  the  rate  of  decline  of  the  (natural-gas) 
industry's  field  resources  has  been  so  rapid,  and  the  provision  for 
taking  care  of  that  depletion  has  been  so  inadequate,  that,  based  on 
personal  investigation  of  over  one-half  of  the  natural-gas  industry 
in  the  United  States,  I  am  sure  that  at  last  three-fourths  of  the 
natural  gas  companies  in  the  United  States  will  be  insolvent  inside 
of  three  years  if  .  .  .  the  practice  of  selling  natural  gas  at  a  figure 
so  low  as  not  to  place  any  incentive  on  saving  the  gas,  but  actually 
putting  a  premium  on  waste,  because  the  gas  is  cheaper  than  any 
efficient  appliance  that  can  be  purchased  or  used  to  save  it  "  is  not 
corrected. 

It  would  carry  the  discussion  too  far  into  detail  to  describe  fully 
the  various  losses  that  take  place  from  the  well  to  the  consumer 
under  present  conditions.  The  over-drilling  of  gas  pools,  the  losses 
in  transmission  due  to  leaks  arising  from  electrolysis  and  other 
causes,  the  dominant  application  of  this  choice  fuel  to  low  industrial 
uses,  the  wastefulness  of  the  majority  of  appliances  used  in  burning 
natural  gas,  the  use  of  this  fuel  in  the  manufacture  of  carbon  black 
in  unsuitable  localities,  are  all  well  known.     Apart  from  the  under- 


350  FULL  UTILIZATION  OF  PETROLEUM 

ground  losses  and  the  needless  employment  of  capital  and  labor  in 
surplus  drilling,  the  average  losses  for  all  natural-gas  companies  in 
the  United  States  between  the  well  and  the  consimier's  meter  are  esti- 
mated, on  good  authorit}',  to  be  from  30  to  35  per  cent  of  the  gas 
produced.^  Then,  of  the  portion  passing  the  consumer's  meter,  80 
per  cent  performs  no  useful  service  owing  to  inadequate  appUances 
and  improper  application. 

The  measures  rapidly  being  adopted  looking  to  fuller  and  more 
efficient  utilization  of  our  dwindling  supplies  of  natural  gas  afford  an 
interesting  object  lesson  on  the  change  that  comes  when  the  output 
of  an  essential  commodity  runs  definitely  short  of  requirements. 

The  Situation  in  Perspective. — The  losses  taking  place  in  the 
exploitation  of  petroleum  have  called  down  many  critical  statements 
as  to  their  magnitude  and  the  ultimate  consequences.  For  the  sake 
of  the  pei'spective  afforded  by  the  outside  view  these  appraisals  may 
not  be  without  value. 

Sidney  Brooks,  an  English  Journalist,  writing  in  "  The  Nineteenth 
Century-,"  reflects  the  consensus  of  opinion  abroad  when  he  remarks: 

America,  as  one  would  expect,  has  been  the  classic  home  of  all 
that  is  hasty,  negligent,  and  well-nigh  ci-iminal  in  the  misuse  of  oil 
as  of  every  other  form  of  natural  wealth;  and  America  in  conse- 
quence finds  herself  to-day  consuming  more  oil  than  she  produces 
and  faced  with  the  prospect  that  her  deposits  may  in  thirty  years 
be  nearing  exhaustion.  Huge  oil-tank  and  gasometer  as  she  is,  it  is 
doubtful  whether  in  the  past  sixty  years  America  has  not  lost  for  all 
time  more  petroleum  and  more  natural  gas  than  she  has  won  from 
the  earth. 

The  Director  of  the  U.  S.  Bureau  of  Mines  ^  has  said: 

What  effort  have  we  made  to  conserve  this  supply  and  to 
utilize  it  to  its  greatest  advantage?  We  have  made  little  effort  until 
very  recently  to  do  these  things.  We  have  been  wasteful,  careless, 
and  recklessly  ignorant.  We  have  abandoned  oil-fields  while  a  large 
part  of  the  oil  was  still  in  the  groimd.  We  have  allowed  tremendous 
quantities  of  gas  to  waste  in  the  air.  Wc  have  let  water  into  the  oil 
sands,  ruining  areas  that  should  have  produced  hundreds  of  thou- 
sands of  barrels  of  oil.  We  lacked  the  knowledge  to  properly  produce 
one  needed  product  without  overproducing  products  for  which  we 
have  little  need.  We  have  used  the  most  valuable  parts  of  the  oil 
for  purposes  to  which  the  cheapest  should  have  been  devoted.  For 
many  years  the  gasoline  fractions  were  practically  a  waste  product 
during  our  quest  for  kerosene ;  with  the  development  of  the  internal- 

1  Address  of  S.  S.  Wyer,  Conference  on  Natural  Gas  Conserv'ation,  ^\'a,shmg- 
ton,  January  15,  1920. 

-  Yearbook  of  the  U.  S.  Bureau  of  Mines,  1916,  Washington,  1917,  p.  117. 


EFFICIENCY  A   NECESSITY  351 

combustion  engine  the  kerosene  is  now  almost  a  waste  product  in  our 
strenuous  efforts  to  increase  the  yield  of  lighter  distillates. 

The  Smithsonian  Institution  ^  reports: 

Under  present  practice,  from  90  to  30  per  cent  of  the  oil  is 
left  underground.  Then,  of  the  quantity  produced,  an  appreciable 
percentage  is  lost  by  fire,  and  a  significant  portion  dissipated  by 
seepage  and  evaporation  due  to  inadequate  storage  facilities.  On 
the  average,  therefore,  it  is  safe  to  say  that  less  than  25  per  cent  of  the 
petroleum  underground  reaches  the  pipe-line.  If  we  subtract  from 
this  proportion  the  losses  involved  in  improper  and  wasteful  methods 
of  utilization,  the  recovery  factor  becomes  perhaps  as  low  as  10  per 
cent.  .  .  . 

In  1919  an  English  writer  ^  attracted  widespread  attention  with 
these  startling  words : 

America  has  recklessly  and  in  sixty  years  run  through  a  legacj^ 
that,  properly  conserved,  should  have  lasted  her  for  at  least  a  cen- 
tury and  a  half.  .  .  .  Just  when  Americans  have  become  accus- 
tomed to  use  twenty  times  as  much  oil  per  head  as  is  used  in  Great 
Britain;  just  when  invention  has  indefinitely  expanded  the  need  for 
oil  in  industry";  just  when  it  has  grown  to  be  as  common  and  as  true 
a  saying  that  "oil  is  King  "  as  it  was  twenty  years  ago  that  steel 
was  king;  just  when  the  point  has  been  reached  ^vhere  oil  controls 
money  instead  of  money  controlling  oil — the  United  States  finds  her 
chief  source  of  domestic  supply  beginning  to  dry  up  and  a  time 
approaching  when  instead  of  ruling  the  oil  market  of  the  world  she 
will  have  to  compete  with  other  countries  for  her  share  of  the  crude 
product.  .  .  . 

America  is  running  through  her  stores  of  domestic  oil  and  is 
obliged  to  look  abroad  for  future  reserves.  .  .  . 

Efficiency  a  Necessity. — For  the  oil  industrj^  there  is  a  single 
cloud  upon  the  horizon — raw  material.  A  problem  is  coming  to  be 
recognized  which,  in  the  earlier  days  of  the  industiy,  was  too  far 
removed  to  appeal  to  the  practical  man.  It  has  been  reiterated  until 
everyone  is  tired  of  hearing  it  that  the  demand  for  oil  is  exceeding 
the  supply.  This  countiy  is  growing  with  startling  rapidity  into 
dependence  upon  foreign  sources  of  petroleum  supply.  What  does 
that  simple  fact  mean?  It  means  that  we  must  pay  growing  atten- 
tion to  all  methods,  engineering  and  economic,  that  will  conduce  to  the 
fuller  utilization  of  the  raw  material  that  we  have.  How  much 
we  have,  no  one  can  say  precisely;  that  the  supply  is  unlimited,  no 
one  would  now  have  the  audacity  to  assert ;  that  the  supply  is  inad- 

1  Petroleum :   A  Resource  Interpretation. 

2  E.  Mackaj'  Edgar  in  Sperlin's  Journal,  September,  1919. 


352  FULL  UTILIZATION  OF  PETROLEUM 

equate  to  our  needs  is  a  fact  requiring  no  further  proof.  We  must 
extract  a  greater  percentage  from  our  underground  reservoirs; 
we  must  more  carefully  guard  the  oil  extracted  from  evaporation, 
contamination,  and  fire;  we  must  refine  that  oil  more  carefully, 
turning  more  of  it  into  products  of  high  economic  rank;  we  must 
have  regard  for  the  appliances  utilizing  the  products  of  that  oil,  to 
the  end  that  the  full  service  may  be  drawn  from  the  commodities 
that  are  turned  over  to  consumption.  More  than  this,  we  must  more 
carefully  adapt  the  rate  at  which  we  produce  and  refine  to  the  highest 
requirements  of  the  market;  we  must  coordinate  and  integrate 
our  activities  that  the  raw  material  which  lies  at  the  foundation  of 
the  whole  activity  may  be  increased  in  productive  capacity.  We 
have  passed  the  time  when  we  can  continue  to  grow  through  incre- 
ments of  volume  alone;  we  must  now  take  advantage  of  the  multi- 
plying power  gained  through  the  balanced  employment  of  the  creative 
agencies  of  production.  We  must  make  what  we  have  go  further 
and  do  more;  we  must  become  efficient,  not  by  the  measure  of  others 
less  efficient,  but  by  the  measure  of  those  in  the  lead.  The  oil  industry 
has  assumed  an  obligation  for  supplying  the  vital  needs  of  modern 
civilization;  its  best  efforts  will  be  required  to  live  up  to  that  respon- 
sibility. 


CHAPTER  XXIX 

THE    FUNCTION    OF    STATISTICS     IN    THE     PETROLEUM 

INDUSTRY! 

Standing  of  Statistics  now  Inadequate. — Mathematics  has  been 
defined  as  the  science  of  rigorous  thinking.  Statistics  may  be 
defined  as  a  branch  of  mathematics  which  faciHtates  the  appHca- 
tion  of  rigorous  thinking  to  the  problems  of  action.  In  the  realm  of 
business  and  industry,  the  science  of  statistics  affords,  or  should 
afford,  the  means  for  measuring  the  use  of  energy,  materials,  and 
capital  to  the  end  that  they  may  be  most  productively  employed. 
As  a  practical  tool,  statistics  has  been  inadequately  utilized  and  the 
field  stands  in  need  of  suitable  recognition  and  proper  rank  amongst 
the  agencies  of  production. 

The  Threefold  Character  of  Statistics. — The  science  of  statistics, 
as  thus  far  developed,  is  divisible  into  three  fundamental,  though 
somewhat  overlapping,  divisions,  which  may  be  termed  (1)  account- 
ing, or  record  statistics,  (2)  engineering,  or  operating  statistics,  and 
(3)  planning,  or  economic  statistics.  Accounting  statistics  has  been 
highly  developed  and  may  be  regarded  as  in  its  maturity ;  engineering 
statistics  has  been  accorded  moderate  application  and  is  in  its  youth ; 
economic  statistics  has  only  recently  come  into  action  and  its  prac- 
tical apphcation  is  still  in  its  infancy.  In  business  and  industry,  the 
utilization  of  statistics  has  suffered  from  an  unbalanced  growth, 
because  of  the  comparative  neglect  of  two  important  functions. 

Accounting  Statistics. — Every  business  organization  as  a  matter 
of  course  maintains  accounts,  or  accounting  statistics,  which  repre- 
sent a  record  of  what  has  happened  for  purposes  of  meeting  financial 
and  legal  requu'ements.  Such  a  record  constitutes  a  mathematical 
account  of  all  transactions  in  goods  and  dollars,  expressed  in  a  form 
specified  by  the  requirements  of  law  and  corporate  finance.  Account- 
ing statistics  are  highly  developed  and  rigorously  standardized  in 
business  practice.  Their  character  is  familiar  to  all.  They  cul- 
minate in  the  conventional  balance  sheet,  and  they  form  the  basis 
of  taxation,  loans,  credit  extensions,  and  other  financial  operations 
of  business  enterprise.     Accounting  statistics  arc  universally  employed 

^  Adapted  from  an  address  by  the  author  before  the  American  Petroleum 
Institute. 

353 


354     FUNCTION  OF  STATISTICS  IN  PETROLEUM  INDUSTRY 

because  of  theii'  obvious  necessity.  The  preparation  of  accounting 
statistics,  however,  is  a  static  function.  This  activity  is  prunarily 
concerned  with  the  measurement  of  tangible  assets,  but  pays  httle 
attention  to  how  those  assets  are  being  used. 

Engineering  Statistics. — Because  of  the  necessary  estabUshment 
of  accounting  as  an  integral  part  of  business  organization,  only 
secondary  consideration  is  customarily  given  to  the  provision  of 
data  in  a  form  adapted  to  improving  the  operating  efficiency  of  the 
undertaking.  For  purposes  of  management,  accounting  data  are, 
in  consequence,  usually  used,  although  such  material  is  designed  for  a 
different  purpose  and  is  not  suited  to  this  end.  The  widespread 
employment  of  accounting  statistics  for  managerial  purposes  is  a 
source  of  weakness  in  many  organizations,  leading  to  loss  and  inef- 
ficiency, and  sometimes  to  failure. 

Accounting  statistics,  therefore,  need  to  be  supplemented  by 
engineering,  or  operating,  statistics  which  will  afford  a  measure  of 
actual  performance  and  suggest  means  for  improving  that  perform- 
ance; in  short,  for  increasing  the  productivity  of  the  enterprise. 
The  function  of  engineering  statistics  is  to  provide  a  picture  of  what 
is  happening  in  such  a  form  that: 

(a)  The  unproductive  portion  of  the  equipment  may  be  rec- 
ognized. 

(6)  The  efficiency  of  the  productive  portion  of  the  equipment 
may  be  measured. 

(c)  The  causes  of  unproductivity  and  inefficiency  may  be 
made  apparent  to  the  end  that  they  may  be  corrected. 

Engineering  statistics,  moreover,  in  addition  to  providing  a  guide 
for  management  should  be  made  to  furnish  superintendents,  foremen, 
and  workmen  records  of  theii'  own  individual  operations  in  order  to 
arouse  their  creative  and  emulative  instincts  and  increase  their 
productivity.  It  has  been  amply  demonstrated  by  a  number  of 
industrial  engineers  that  by  keeping  individual  records  of  produc- 
tion and  systematically  attempting  to  remove  obstacles  which  pre- 
vent complete  accomplishment,  a  notable  degree  of  cooperation  is 
attained  and  unsuspected  possibilities  developed  in  the  working 
staff. 

Fig.  1,  on  page  2,  shows  the  economic  structure  of  the  oil  industry 
and  suggests  the  headings  which  engineering  statistics  should  cover. 

H.  L.  Gantt  has  strikingly  described  the  difference  between  engi- 
neering statistics  and  accounting  statistics  as  comparable  to  the  dif- 
erence  between  a  moving  picture  and  a  photograph. 


ECONOMIC  STATISTICS  355 

Economic  Statistics. — In  the  early  growth  of  business  and  indus- 
trial activities,  with  bountiful  resources  and  expanding  markets, 
economic  statistics  have  systematically  been  used  even  in  less  degree 
than  engineering  statistics,  although  they  have  always  been  taken 
into  account  in  a  qualitative  and  imperfect  manner.  Economic 
statistics  are  needed  for  planning  accurately  and  effectively,  for 
keeping  efforts  on  the  right  track,  and  as  a  support  to  engineering 
statistics  in  operating. 

Success  in  management  depends  in  large  degree  upon  the  extent 
to  which  accumulated  experience  can  be  rendered  available  for  use, 
and  upon  the  exactitude  with  which  conditions  ahead  can  be  appraised. 
The  primary  function  of  economic  statistics  is  to  gather  the  experience 
of  the  organization,  of  the  industiy  of  which  the  organization  is  a 
part,  and  of  business  and  industry  in  general,  and  to  render  this 
composite  experience  available  for  use  in  the  problems  of  manage- 
ment and  planning.  A  further  purpose  of  economic  statistics  is  to 
provide  a  comparison  of  actual  performance  with  outside  standards 
of  accomplishment,  as  well  as  to  measure  the  results  of  any  given 
course  of  action  with  a  view  to  determining  its  efficacy  and  justifying 
its  continuance  or  termination.  For  the  sources  of  economic  sta- 
tistics, the  whole  business  and  industrial  field  must  be  scanned — 
Government  activities,  technical  and  trade  associations,  trade  publi- 
cations, research  bureaus,  and  the  vast  range  of  financial  and  economic 
literature. 

Under  the  complex  conditions  of  modern  industrial  activity, 
efficiency  in  management  is  predicated  more  and  more  upon  a 
coordinated  and  balanced  development  of  accounting,  engineering 
and  economic  statistics;  and  the  development  and  furtherance  of 
both  engineering  and  economic  statistics  are  matters  of  urgent  impor- 
tance, involving  investigation,  research,  and  engineering  practice 
of  a  rigorous  and  exacting  character.  The  field  of  engineering  and 
economic  statistics  is  underdeveloped,  and  much  able  effort  should 
go  toward  perfecting  and  extending  its  applicability  and  insuring 
its  adequate  integration  with  the  more  accustomed  means  of  mana- 
gerial control. 

Fig.  151  is  a  chart  of  the  economic  structure  of  business  and  indus- 
trial activity,  and  suggests  the  topics  to  be  covered  by  economic 
statistics  in  the  field  of  general  business  and  industrial  conditions. 

Statistical  Technique. — The  techni(|ue  whereby  statistics,  in  theu' 
broad  meaning,  may  be  brought  to  adequacy  as  a  working  tool  is  by 
no  means  perfected,  and  if  statistics  are  to  meet  the  responsibility 
placed  upon  them  by  modern  industrial  requirements,  considerable 
attention  must  be  accorded  the  means  for  gathering,  analyzing,  inter- 


356     FUNCTION  OF  STATISTICS  IN  PETROLEUM  INDUSTRY 

preting  and  presenting  the  facts  upon  which  the  success  of  any  enter- 
prise is  coming  more  and  more  to  depend.  There  is  need  for  mutual 
understanding  and  constructive  cooperation  between  the  various 
agencies  concerned  with  this  activit}^,  to  the  end  that  there  may  be  a 


FOREIGN    TRADE 


BUYING    POWER 


SPECULATION 


TRANSPORTATION 


MANUFACTURE 


"RANSPOBTATION 


RAW    MATERIAL 


LABOR- 
MANAGEMENT 


MONEY- 
CREDIT 


Fig.  151. — Chart  of  the  industrial  structure  showing  the  sub-divisions  of  the  field 
for  economic  statistics. 


free  interchange  of  ideas  and  methods,  and  that  an  effective  tech- 
nique may  be  built  up  and  established. 

Gathering  of  Statistics. — Accounting  and  engineering  statistics 
are  inherently  a  responsiVjility  of  the  industrial  unit  itself,  but  eco- 
nomic statistics  must  be  drawn  not  only  from  the  operating  organiza- 
tion, but  quite  extensivety  from  external  sources,  especially  Govern- 
ment activities,  industrial  and  trade  associations,  the   trade   press 


ANALYZING   STATISTICS  357 

and  a  wide  range  of  financial  and  economic  sources.  In  respect  to 
economic  statistics,  the  oil  industry  has  available  a  more  complete 
and  accurate  record  of  the  flow  of  its  raw  materials  and  manufactured 
products  than  most  other  industries  enjoy.  The  economic  statistics 
of  crude  petroleum  furnished  monthly  by  the  U.  S.  Geological  Sur- 
vey and  the  economic  statistics  of  refined  products  supplied  each 
month  by  the  U.  S.  Bureau  of  Mines  are  valuable  material.  A  draw- 
back to  these  figures,  however,  is  the  delay  intervening  before  they 
are  made  available  to  the  industry,  and  every  effort  should  be  bent 
toward  decreasing  this  interval  in  order  that  their  usefulness  may  be 
enhanced.  The  American  Petroleum  Institute  is  making  creditable 
efforts  in  this  direction.  In  the  gathering  of  statistics,  the  trade  press 
has  somewhat  confined  its  efforts  to  well  data,  field  production  and 
price  quotations.  In  all  three  respects  there  is  some  room  for  im- 
provement in  accuracy  and  continuity. 

Analyzing  Statistics. — In  the  analysis  of  statistics  no  standardized 
technique  is  available.  A  great  gain  in  convenience  and  effectiveness 
may  be  made  by  devising  and  using  appropriate  analysis  schedules 
which  will  automatically  make  the  primary  analysis.  The  use  of 
index  numbers  has  been  largely  neglected  and  this  convenient  device 
may  be  effectively  employed  in  many  directions  in  the  oil  industiy. 
Various  other  mathematical  devices  and  expedients  for  weighting, 
averaging,  combining,  etc.,  may  be  employed  to  advantage  in  specific 
instances.  The  technique  in  these  various  directions  suggested  by 
the  interesting  work  now  being  conducted  by  the  Harvard  University 
Committee  on  Economic  Research  and  published  in  the  Monthly 
Review  of  Economic  Statistics  is  of  value  in  this  connection. 

For  purposes  of  statistical  analysis,  graphic  methods  are  of  out- 
standing importance.  Natural-scale  graphs  are  suitable  for  size 
comparisons,  whereas  the  use  of  semi-logarithmic  charts  gives  remark- 
able results  where  trend  comparisons  are  important.  The  use  of 
graphic  methods  for  purposes  of  analysis  offers  a  fertile  field  for 
further  research  and  development. 

Interpretation  of  Statistics. — After  statistics  are  gathered  and 
analyzed,  the  most  difficult  task  still  remains — their  interpretation. 
The  proper  interpretation  of  statistical  results,  it  goes  without  saying, 
requnes  the  highest  type  of  ability.  To  draw  therefrom  full  sig- 
nificance and  accurate  meaning  demands  not  only  acquaintanceship 
with  statistical  technique,  but  a  knowledge  of  engineering,  economics, 
and  technology  in  the  field  to  which  the  figures  pertain.  Accurate 
interpretations,  moreover,  demand  the  research  point  of  view, 
together  with  piactical  contact  with  the  problems  dealt  with. 
Effective  work  in  the  gathering  and  analysis  of  figures  is  of  no  avail 


358     FUNCTION  OF  STATISTICS  IN  PETROLEUM  INDUSTRY 

if  they  are  not  correctly  interpreted  and  if  their  full  meaning  is 
not  deduced. 

Presentation  of  Statistics. — The  final  step  in  statistical  work  is  the 
presentation  of  the  results.  Nothing  of  practical  value  has  been 
accomplished  until  the  results  are  brought  into  action.  There  has 
been  failure  in  much  statistical  work  to  pay  proper  attention  to  this 
phase  of  the  activity.  The  presentation  of  statistics  is  not  merely 
a  science — it  is  an  art  as  well. 

In  the  exposition  of  statistical  results,  it  is  notable  that  rather 
simple  and  olndous  expedients  for  gaining  clarity  and  effectiveness  are 
usually  overlooked.  For  example,  statistical  tables  gain  in  simplic- 
ity and  in  the  readiness  with  which  they  may  be  grasped,  if  the  figures 
are  expressed  in  large  units  and  fractions  thereof  instead  of  in 
smaller  units  of  the  barrel  and  gallon.  For  the  presentation  of  sta- 
tistics, the  use  of  graphical  devices  is  highly  advantageous  and  great 
advances  are  here  possible  over  the  common  practices  in  this  respect. 
Graphics  serve  not  only  to  impress  the  facts  upon  the  mind,  but  to 
show  their  interrelationships,  thus  affording  ready  comprehension. 
Numerical  statistics  are  like  the  description  of  a  picture;  graphically 
expressed  statistics  are  the  picture  itself.  Graphics  afford  not  only 
ease  of  comprehension,  but  in  addition  provide  that  most  important 
essential — perspective.  Space  prevents  extended  discussion  of  the 
technique  of  graphic  presentation,  but  much  can  be  gained  from 
"  Graphic  Methods  for  Presenting  Facts,"  by  Brinton  and  "  How  to 
Make  and  Use  Graphic  Charts,"  by  Haskell,  while  the  pages  of  the 
present  book  may  prove  suggestive.  Effective  results  may  fre- 
quently be  attained  by  combining  tabular  and  graphic  presen- 
tations. 

Graphic  charts  are  applicable  not  only  to  purposes  of  manage- 
ment, but  ai-e  also  especially  valuable  for  the  operating  staff  and  the 
individual  workman.  The  employee  should  also  be  the  beneficiary 
of  visual  methods.  To  visualize  data  and  information  is  to  add  to 
human  intelligence  and  effectiveness. 

Research. — Statistical  research,  or,  using  the  preferable  term, 
economic  research  is  growing  in  importance  as  a  method  for  inves- 
tigating operating  and  economic  conditions  for  purposes  of  con- 
tributing to  productivity  and  accuracy  of  planning.  Research — 
the  making  of  careful  measurements  and  the  drawing  of  appropriate 
deductions  therefrom — is  the  vital  part  of  statistical  work,  and 
without  the  scientific  point  of  view  the  handling  of  statistics  becomes 
a  mechanical  and  routine  matter,  and  the  results  are  inadequate  and 
likely  to  be  misleading. 

The  importance  of  statistical,  or  economic,  research  was  recog- 


RESEARCH   IN   THE   PETROLEUM   INDUSTRY  359 

nized  earlier  in  finance  than  in  industry,  as  evidenced  by  strong  sta- 
tistical and  research  bureaus  in  banking  and  investment  estabhsh- 
ments.  It  goes  without  saying  that  the  whole  field  of  insurance  is 
grounded  upon  the  results  of  research  in  vital  statistics — to  such  a 
degree,  indeed,  that  this  business  has  itself  the  distinction  of  being 
virtually  an  exact  science.  It  is  to  be  noted  that  statistical  research 
has  been  extensively  developed  by  advertising  agencies  and  trade 
publications.  Now  the  up-to-date  advertiser  makes  extensive 
and  close  use  of  research  methods  in  appraising  the  markets  which 
the  advertising  is  designed  to  reach. 

During  the  war,  statistical  (economic)  research  became  exten- 
sively necessary  as  the  basis  for  the  coordination  of  the  country's 
production  and  the  allocation  of  its  products.  At  the  present  time, 
economic  research  is  developing  rapidly  in  the  larger  and  more 
complicated  industries,  especially  the  packing  industry,  the  steel 
industry,  the  rubber  industry,  the  automotive  industry  and  the  oil 
industry,  where  this  activity  is  found  under  various  names  such 
as  "  statistical  research,"  "  commercial  research,"  "  trade  promotion 
and  research,"  "  market  control,"  "  engineering  statistics,"  "  eco- 
nomic research,"  and  the  like. 

Research  in  the  Petroleum  Industry. — The  opportunity  for  sta- 
tistical, or  economic,  research  in  the  oil  industry  is  especially  out- 
standing by  virtue  of  the  rapid  changes  that  are  taking  place  in  this 
activity  and  the  miportant  and  extensive  range  of  service  rendered 
by  the  products  of  petroleum.  Because  of  the  rapidity  with  which  the 
raw  material  base  is  changing  in  geographical  position,  chemical  char- 
acter, and  volume,  and  because  of  the  acceleration  of  demand  over 
supply  as  working  through  a  multiple  production  type  of  fabrication, 
the  economic  balance  between  the  various  petroleum  products  is 
altering  with  notable  rapidity.  The  detection  and  measurement  of 
these  conditions,  and  the  coordination  of  the  tendencies  with  market 
requirements  on  the  one  hand,  and  operating  conditions  on  the  other, 
afford  wide  scope  for  careful  inquiry  and  effective  results.  Among 
the  subjects  that  may  be  covered  in  such  work  are  price  studies, 
appraisals  of  supply  and  demand,  measurement  of  marketing 
territory  and  requirements,  analyses  of  consuming  activities  such  as 
the  automotive  industiy,  statistical  measurements  of  the  effects  of 
changing  technology,  and  so  on,  not  to  mention  more  specific  analyses 
making  use  of  both  accounting  and  engineering  statistics  in  connec- 
tion with  operating  conditions. 

Conclusion. — In  short,  adequate  statistics  represent  the  means 
for  attaining  engineering  control  of  operations,  to  the  gain  of  increased 
productivity  and  more  effective  planning.     The  development  and 


360      FUNCTION  OF  STATISTICS  IN  PETR(JLEUM  INDUSTRY 

balanced  employment  of  accounting,  engineering  and  economic 
statistics,  directed  from  the  research  point  of  view,  are  essential  to 
this  end.  As  a  concrete  example  of  operating  and  planning  on  the 
basis  of  the  findings  of  statistics,  there  may  be  mentioned  the  instance 
of  the  railroad  executive  who  appreciating  that  earnings  are  made 
by  the  ton  mile  and  expenses  incurred  by  the  train  mile,  determined 
every  action  by  the  extent  to  which  it  contributed  to  the  increase  of 
ton  miles  and  to  the  decrease  of  train  miles. 


INDEX 


Accounting  statistics,  353-354 

Acreage,  controlled  by  natural-gas  producers,  197 

oil-bearing,  34,  35,  36 
Alcohol,  282-283,  295,  298 

See  blended  motor-fuels,  composite  motor-fuels,  -motor-fuel  problem 
Alderson,  V.  C,  337 

American  Gas  Association,  142,  160,  301,  307 

American  Institute  of  Mining  and  Metallurgical  Engineers,  12,  20,  71,  164,  329 
American  Mining  Congress,  32 

American  Petroleum  Institute,  7,  27,  52,  65,  73,  126,  158,  282,  293,  353,  357 
American  Society  of  Mechanical  Engineers,  335 
America's  Power  Resources,  18,  311,  331 
Aniline,  298 

Annals  of  the  American  Academy,  23 
Appalachian  field,  15,  21,  22 
Appliances,  changes  in,  295-298 

relation  to  fuel,  296-299 
Arnold,  Ralph,  18,  29,  34,  46,  47,  325 
Asphalt,  187,  188 

Asphalt-base  crudes,  12-13,  77-78,  164-165,  169,  291 
Assets  of  American  oil  industry,  7 
Automotive  Fuel  Club,  112,  113 
Automotive  Industries,  126,  263,  287 
Automotive  transportation,  effect  upon  petroleum  industry,  262-271 

future  demands  of,  264-265,  267,  286-287 

gasoline  consumption  of,  119-129,  286 

growth  of,  49,  50,  262-267,  287 

motor-fuel  problem,  270,  279-282,  285-289 

peak-load  problem  in,  270-271 

relation  to  fuel  oil,  159,  163,  269 

relation  to  gasoline,  112-117,  127-129,  267-269,  286-287 

relation  to  kerosene,  132-135,  140-141,  269 

relation  to  lubricating  oils,  175-182,  269-270 

Ball,  Max  W.,  32 
Barrel-day  method  of  valuation,  5 
Bates  and  Lasky,  20,  28,  30,  40,  41,  42,  237,  241,  242 
Beal,  Carl,  33,  47 
Benzol,  280-282,  294-295,  298 
Blended  motor-fuels,  279-284 

Bituminous  coal,  as  a  source  of  oils,  280-282,  330-335 

361 


362  INDEX 

Brinton,  W.  C,  358 

Brooks,  Sidney,  350 

Bunker  oil,  157 

Bureau  of  Corporations,  178 

Bureau  of  Oil  Conservation,  see  U.  S.  Fuel  Administration 

Bureau  of  Railway  Economics,  178 

Burrell,  0.  A.,  326,  327 

By-products  of  petroleum,  183-194 

asphalt,  187-188 

chart  of,  194 

future  of,  194 

greases,  192-193 

medicinal  oils,  193 

miscellaneous,  193-194 

petrolatum,  191-192 

wax,  184-187 

California,  fuel  oil  in,  152-154 
California  field,  17,  21,  22 

production  cost  in,  30-31 

refining  costs  in,  87 

relative  importance  of,  58,  59 
California  State  Council  of  Defence,  153,  154 
Capital  stock  of  oU  industry,  8 
Capitalization  of  oil  industry,  7-9 
Carbon  black,  206-207 

Carburetted  water-gas,  300-301,  304,  305,  308,  310 
Casinghead  gasoline.  111,  207-211,  276 
Centralized  power  plants,  333-334 
Chemical  character  of  oil,  12 
City-gas,  300-311,  332-333 

changes  in  manufacture  of,  308-311 

cost  of,  307,  308 

development  of,  301-303 

future  of,  309-311,  332-333 

problem  of,  300-311 

relation  to  gas  oil,  303-311 

types  of,  300-301 
City-gas  industry,  productive  of  oil,  332-333 
Coal,  equivalent  of  fuel  oil,  162 

relative  efficiencj'^  of,  152 
Coal  gas,  301 

Coal  industry,  relation  to  petroleum  industry,  330-335 
Coal  oil,  130,  280,  331-335,  336,  340 
Coal  refining,  331,  333,  336 
Coal  products,  281-282,  331,  333 
Coke  industry,  331-332 
Coke-oven  gas,  301 
Coke,  petroleum,  187,  189-191 
Combustion,  337 
Commerce  Reports,  327,  328 


INDEX  363 


Commercial  control  of  oil  deposits,  312-319 
Common  carriers,  67 

Composite  motor-fuels,  279-284,  294-295 
Conservation,  205-206,  342-352 
Consumption  factor,  for  gasoline,  121,  123 

for  motor-oil,  180 
Consumption  of  fuel  oil,  149-163 

of  gasoline,  117-129,  285-288 

of  kerosene,  135-141 

of  lubricating  oils,  171-182 

of  natural  gas,  196-198 

of  petroleum,  58,  61,  255,  261 
Coordination  of  engine  and  fuel,  298-299,  346-348 
Cost,  of  cracking,  273 

of  drilling,  28,  241,  242 

of  labor,  89 

of  producing  oil,  29-31 

of  refining,  85,  87,  88 

of  transporting  oil,  67-68,  72 
Cracking,  cost  of,  273 

development  of,  146 

economic  significance  of,  272-278 

future  of,  277-278,  293 

nature  of,  272,  292-293 

raw  material  used  for,  273-274 

relation  to  fuel  oil,  146,  163,  273-274 

relation  to  gas  oil,  273-274,  303-304 

relation  to  gasoline,  274-278,  293 

relation  to  kerosene,  139-141 

typical  yield  from,  83,  273 
Crank-case  dilution,  146,  181,  270,  348 
Crude  petroleum,  exports  of,  230 

field  development  of,  27-47 

in  foreign  countries,  22-26,  294,  312-319,  320-329 

occurrence  of,  12-26 

price  of,  234-242,  245,  246,  248-250,  253-261 

production  of,  48-63 

refining  of,  75-89 

reserves  of,  18-20,  325-326 

run  to  stills,  100,  101 

transportation  of,  64-74 
Cunningham,  R.  W.,  79 
Cushing  Pool,  33,  238-239,  242 

Darnell,  J.  L.,  46,  47 
Day,  David  T.,  18 
Day,  E.  E.,  50,  260 
Dean,  E.  W.,  110,  113,  345 
Decline  curves,  20,  45-47 
De  Golyer,  E.,  324 
Demand,  for  fuel  oil,  149-163 


364  INDEX 

Demand,  for  gasoline,  119-129,  285-288 

for  kerosene,  135-141 

for  lubricating  oils,  171-182 

for  natural  gas,  195-198 
Depletion  of  oil  properties,  45-47 
Dickinson,  H.  C,  293 
Diesel  engines,  155,  159-160,  317,  347 
Dilution  of  motor-oil,  146,  181,  270,  348 
Dividends  of  oil  industry,  9-11 
Doherty,  H.  L.,  7,  10 
Drilling,  cost  of,  28,  241,  242 

methods  of,  28 
Dry  holes,  40 

Economic  Geology,  29 

Economic  organization  of  oil  industry,  1-3 

Economic  research,  358-359 

Economic  statistics,  355,  356 

Edgar,  E.  Mackay,  351 

Efficiency,  growing  need  for,  351-352 

of  oil  production,  343-345 

of  oil  refining,  345 

of  oil  transportation,  345 

of  oil  utilization,  346-348 
Ehlen,  M.  C,  101 

End-point  of  gasoline,  112-116,  276,  293 
Engineering  statistics,  354 
Epstein,  Max,  73 
Exports,  222-232 

distribution  of,  228-229,  232 

economic  function  of,  223-224 

future  of,  232 

growth  of,  224-225,  230,  231 

of  crude  petroleum,  230 

of  fuel  oil,  223-231 

of  gasoline,  223-231 

of  kerosene,  223-231 

of  lubricating  oils,  223-231 

price  of,  227-228,  245 

ratio  to  domestic  production,  222-223 

trend  of,  224-225,  230,  231,  232 

value  of,  225-227 

Federal  Trade  Connnission,  3,  4,  6,  10,  30,  31,  64,  68,  69,  70,  88,  216,  243 

Field,  J.  A.,  40 

Fielder,  R.  E.,  115 

Fieldner,  Straub,  and  Jones,  297,  346 

Financial  policy  of  oil  industry,  9,  11 

Floyd,  F.  H,,  113 

Fisher,  Irving,  40 

Foreign  countries,  oil  in,  22-26,  294,  312-319,  320-329 


INDEX  365 


Foreign  oil  deposits,  bearing  upon  gasoline  supply,  294 

Form  value,  137,  335 

Franklin  Automobile  Co.,  286-287 

Fuel  oil,  75-89,  142-163 

automotive  transportation  use  of,  159-160,  163 

California  consumption  of,  152-154 

composite  charac  ter  of,  348 

consumption  of,  152-163 

demand  for,  152-163 

domestic  use  of,  162 

effect  of  cracking  upon,  273-274,  277-278 

efficiency  of,  as  fuel,  152 

exports  of,  148,  149,  223-231 

industrial  use  of,  154-155,  161-163 

marine  use  of,  153-157,  317,  347 

marketing  of,  146 

price  of,  148,  149,  227 

production  of,  84-87,  143,  144,  147-152 

public  utility  use  of,  158-159 

railroad  consumption  of,  155,  157-158 

relation  to  coal,  162 

relation  to  refinery  practice,  76-82,  145 

relative  importance  of,  147 

sources  of,  143,  145 

stocks  of,  148-151 

trend  of  supply  and  demand,  148-149 

types  of,  75,  142-143,  145 

value  of,  107,  226-227 

waste  of,  347-348 
Full  utilization,  342-352 
Future  production,  estimating,  47 

Gantt,  H.  L.,  102,  354 

Garfias,  V.  R.,  71,  72,  73,  328,  329 

Gas  oil,  146 

consumption  of,  160-161 

price  of,  307 

relation  to  city  gas,  303-311 

relation  to  cracking,  272-274,  277-278,  303 
Gas  rates,  306-308 
Gasoline,  75-89,  110-129 

automotive  consumption  of,  119-129,  286 

components  of  sujjply,  116,  290-294 

consumption  by  states,  126 

consumption  factor  for,  123-124 

cracked.  111,  272-274 

demand  for,  119-129 

efficiency  of  utilization  of,  346 

end-point  of,  112-116,  276,  293 

enlarging  the  supi)ly  of,  290-299 

exports  of,  120,  124,  125,  223-231 


366  INDEX 

Gasoline,  from  natural  gas,  111,  207-211,  276 

losses  in  refining,  345 

natural,  110,  274-275,  290-292 

price  of,  104-106,  120,  210,  227 

production  of,  84-87,  117-122 

relation  of  kerosene  to,  114-115 

relation  to  refinery  practice,  75-83 

seasonal  requirements  for,  126-129 

stocks  of,  121-122,  128-129 

trend  of  situation,  117-119 

value  of,  107-109,  226-227 
Gathering  lines,  map  of,  69 
Geology,  application  of,  34 
Geological  Society  of  America,  34 
Gifford,  George  B.,  78 

Gilbert  C.  G.,  12,  18,  183,  311,  331,  335,  339 
Gillen,  M.  J.,  123 
Greases,  192-193 
Gulf  Coast  field,  16,  21 

Harper,  R.  B.,  301,  304,  305,  306,  307 

Harvard  University  Committee  on  Economic  Research,  50,  259-260,  357 

Haskell,  A.  C,  358 

Healdton  oil-pool,  69 

Heating  standards  for  gas,  302-303,  309,  310 

Heavy-oil  engines,  159-160 

Hill,  H.  H,  77,  110,  113 

Hudson  River  Vehicular  Tunnel,  297,  346 

Huntley,  L.  G,  325,  326 

Huntley,  Stirling,  325,  326 

Hydrocarbon  compounds,  12,  164-165 

Hydrogenation,  273 

Idle  refinery  capacity,  100 

cost  of,  102 
Illinois  field,  16,  21,  22 
Illumination,  development  of,  130-131 
Illuminating  oil,  see  kerosene 
Independent  Oil  Men's  Association,  344 
Independents,  3,  213,  215 
Industrial  structure,  356 
Initial  production,  29,  41,  44 
Injection  engine,  296 
Inspection  laws,  220 
Integration,  3-5,  69-70 
Internal  combustion  engine,  288,  295-298 
International  aspects  of  petroleum,  22-26,  312-319 

commercial  control  of,  312-314 

exports  of  petroleum,  222-232 

Mexico,  320-329 

oil  in  foreign  countries,  22-26,  320-329 


INDEX  367 


International  aspects  of  petroleum,  political  control  of,  312-314 

problem  of  nationalization,  315-316 

relative  to  ocean  sliipping,  317-318 

rivalry  between  great  powers,  316-317 

suggested  policy  of  United  States,  318 

trend  of  situation,  318-319 
Interstate  Commerce  Commission,  67,  74 
Investment  in  oil,  5-7 

Jobbing,  212-221 

Joint-production,  75-76 
Journal  of  Political  Economy,  40 

Kerosene,  75-89,  130-141 

changing  character  of,  139-140 

consumption  of,  135-137,  139-140 

demand  for,  135,  140 

exports  of,  130,  130-137,  223-231 

form  value  of,  137 

future  of,  140-141 

price  of,  136-137,  227 

production  of,  84-87,  131,  132,  136-139 

relative  importance  of,  131 

relation  to  gasoline,  112-115,  132-135 

seasonal  variation  in  production  of,  133-135 

sources  of  supply  of,  85-88,  132,  133 

stocks  of,  136-139 

trend  of  supply  and  demand,  134-137 

value  of,  131,  226,  227 

waning  status  of,  131 
Kettering,  C.  F.,  282,  297,  346 

Labor  costs,  in  drilling,  28,  241 

in  production,  30 

in  refining,  88-89 
Latin-American  countries,  oil  in,  315-316,  320-329 
Lewis,  J.  O.,  344 
Lifting  cost,  30 

Lighting  standards  for  gas,  301-303 
Lima-Indiana  field,  15-16,  21,  22 
Little,  Arthur  D.,  Inc.,  13 
Lloyd's  Registry  of  Shipping,  70,  71,  156 
Losses,  in  oil  production,  343 

in  refining,  345 

in  transportation,  345 

in  utilization,  346-348 
Lubin,,  Isador,  20,  233,  239 
Lubricating  oils,  75-89,  164-182 

automotive  consmnption  of,  176,  177,  179 

blended  lubricants,  168 

chemical  composition  of,  164-165 


368  INDEX 

Lubricating  oils,  cylinder  stock,  81,  1G7,  173 
demand  for,  171-182 
dilution  of,  146,  181,  270,  348 
exports  of,  171,  172,  176-177,  179,  223-231 
from  asphalt-base  petroleums,  77,  78,  169 
greases,  192-193 

industrial  consumption  of,  17(j-179 
motor-oU,  179-182,  348 
non-viscous  neutrals,  167-168 
paraffin  oils,  168,  173 
price  of,  171,  172,  173,  227 
production  of,  84-87,  170-173 
railroad  consumption  of,  176,  177-178,  179 
relation  to  crude  petroleum,  77,  164—165 
relation  to  refinerj^  practice,  76-82,  165-166 
seasonal  character  of  automotive  demand,  181-182 
stocks  of,  171,  172,  174,  175 
types  of,  75,  166-167,  173 
value  of,  107,  226-227 
viscous  neutrals,  168 
wastes  of,  348 

McGuire,  A,  G.,  213,  218 

Mabery,  C.  F.,  12,  164 

Magnitude  of  oil  industry,  4 

Manufactured  gas,  see  ci{y-ga.s 

Marine  transportation,  use  of  fuel  oil  in,  153-157,  163,  317 

Market  analysis,  221 

Marketing,  212-221 

analysis  of  markets,  221 

investment  in,  5-6 

of  fuel  oil,  219 

of  gasoline,  21.5-219 

of  kerosene,  219 

of  lubricating  oils,  219-220 

value  of  equipment,  5 
Mason,  H.  F.,  95 

Master  Car  Builders'  Association,  74 
Medicinal  oils,  193 
Mexico,  23-25,  52-53,  320-329 

article  27  of  Constitution  of,  328 

bearing  upon  gasoline  supply,  275,  294 

character  of  oil  in,  326-327 

estimated  oil  reserve  of,  23,  25,  325-^326 

exports  of  oil  from,  321 

laws  affecting  oil  in,  327-329 

map  of  oil-pools  in,  323 

nationalization  of  oil  in,  316,  327-328 

occurrence  of  oil  in,  322-324 

oil-fields  of,  320-323,  32.5-326 

production  of  oil  in,  52,  53,  321-323 


INDEX  369 


Mexico,  refinery  jdelds  from  oil  from,  327 

relative  increase  in  production  of,  51-53,  321,  322 

salt  water  encroachment  in,  324-325 

taxation  in,  328-329 

unmined  supply  in,  23-25,  325-326 
Midgley  Gas  Engine  Indicator,  282 
Midgley,  Thomas,  Jr.,  282,  297 
Mid-Continent  field,  17,  21,  22 

cost  of  drilling  in,  28,  241,  242 

dry  holes  in,  40 

production  cost  in,  30 

production  in,  42-43 

refinery  types  in,  78-79,  92,  96-97 

relative  importance  of,  58,  59 

trend  of  drilling  in,  44-45 

wells  in,  41 
Mining  and  Metallurgy,  325,  326 
Mixed  gas,  301,  310 
Mixed-base  crudes,  13,  77-78,  164-165 
Monthly  Labor  Review,  233,  237,  253 
Motor-fuel,  see  motor-fuel  problem,  gasoline,  kerosene 

alcohol  as,  282-283 

benzol  as,  280-282 

blends,  279-284 

demand  for,  285-288 

problem  of,  270,  280-282,  285-299 

supply  of,  288-289 
Motor-fuel  problem,  270,  280-282,  285-299,  346-347 
Motor-gasoline,  112-117 
Motor-oil,  179-182,  348 

consumption  of,  180 

dilution  of,  181 

seasonal  demand  for,  181-182 

See  lubricating  oils 
Motor  locomotives,  158 
Motor  ships,  155-156 
Motor  vehicles,  production  of,  264,  265 

registration  of,  263,  264,  266,  268,  286,  287 
Meyer,  \V.  I.,  199,  201 
Multiple  production,  1,  183,  341 
Municipal  fuel  plants,  281,  332-333 

National  Gas  Association  of  America,  199,  201,  204 
National  Petroleum  News,  7,  42,  233,  253 
National  Petroleum  War  Service  Committee,  239,  247 
Natural  Gasoline  Manufacturers,  111 
Natural  gas,  195-211 

acreage,  197 

appliances,  205 

association  with  oil,  13 

carbon  black  from.  206-207 


370  INDEX 

Natural  gas,  compressors,  201-202 

conservation  of,  205-206 

consumption  of,  196-198 

gasoline  from.  111,  207-211 

peak  load  in  use  of,  202-203 

price  of,  202-204 

production  of,  198-200 

relation  to  city  gas,  195 

rock  pressure,  199-200,  201 

transmission  of,  200 

utilization  of,  202 

value  of,  197 

waning  supply  of,  196-197,  333 

wastes  of,  203-205,  344,  348-350 

well  data,  199 
Natural  gasoline,  275,  277,  290-292,  see  natural-gas  gasoline 
Natural-gas  gasoline,  207-211 
Naval  Annual,  156 
Naval  use  of  fuel  oil,  157,  317 
Neutral  oils,  75,  166-167 
New  England,  fuel  problem  in,  162 
Northrop,  John  D.,  312,  313 

Occurrence  of  petroleum,  13,  323-324 

Office  of  Farm  Management,  266,  268 

Oil,  see  crude  petroleum 

Oil  and  Gas  Journal,  38,  39,  40,  41,  326 

Oil  gas,  301 

Oil,  Paint,  and  Drug  Reporter,  233 

Oil  Weekly,  91,  93,  94,  102 

Oil-coal,  340-341 

Oil-field  development,  27-47 

competition  in,  31-34,  343 

efficiency  of,  342-345 
Oil-fields  of  United  States,  13-18,  21 

comparative  importance  of,  57-58 

production  of,  54-57 
Oil-pools,  list  of  important,  13 
Oil-reserves,  estimates  of,  in  foreign  countries,  22-25 

in  Mexico,  23,  325-326 

in  United  States,  18-21 
OU-shale,  336-341 

character  of,  337 

distribution  of,  337-338 

domestic  development  of,  339 

foreign  development  of,  338-339 

future  of,  339-341 

products  yielded  by,  338-339 

relation  to  coal,  334-335,  337,  340-341 

Scottish,  338-339 
Oil-tankers,  comparison  with  merchant  tonnage,  70 


INDEX  371 

Oil-tankers,  data  on,  70-73 

growth  in  number  of,  71 

investment  in,  6 

time  of  voyage  of,  72 

tonnage  of,  71,  73 
Oil-wells,  completions  by  years,  38  39,  42,  43 

cost  of  drilling,  241,  242 

distribution  of,  37 

ill  Mid-Continent  field,  41 

in  United  States,  by  states,  35,  36,  38 

non-productive,  40 

relation  to  production,  42—43 
Old  production,  decline  in,  27-29,  42-43 

Paraffin-base  crudes,  12-13,  77-78,  81,  164-165,  291 

Paraffin  oils,  75,  166-167 

Paraffin  wax,  see  wax 

Peak-load  problem,  for  gasoline,  126-129 

for  heat  and  power,334 
Persons,  Warren  M.,  259 
Petrolatum,  191-192 
Petroleum  industry,  assets  of,  7 

becoming  a  transportation  industry,  271 

capital  absorbed  by,  9 

capitalization  of,  7-9 

chart  of,  2 

economic  organization  oi,  1-4 

profits  of,  10-11 

relation  to  coal  industry,  330-335 

value  of  output  of,  107-109 
Petroleum  products,  methods  of  refining,  75-83 

production  of,  85,  86 

rank  of,  89 

varieties  of,  75 
Philadelphia  Company,  199-200 
Pig  iron,  relative  production  of,  49 
Pipe-lines,  1,  64-70 

efficiency  of,  345 

estimated  value  of,  4,  5,  04 

gathering  lines,  69 

magnitude  of,  64-70 

map  of,  66 

tariffs,  68 
Plan  of  oil-price  stabilization,  239,  247 

Pogue,  J.  E.,  12,  18,  20,  183,  233,  239,  279,  285,  311,  331,  335,  339 
Polakov,  W.  N.,  102 
Political  control  of  oil  deposits,  312-319 
Population,  relative  growth  in,  49 
Premiums  for  crude  petroleum,  237 
Prices,  104-109,  233-252,  253-261 

effect  of  Cushmg  pool  upon,  238-239,  242-243 


372  INDEX 

Prices,  effect  of  war  upon,  239,  243-244,  247 

explanation  of  price  calculations,  233 

index  numbers  of,  234-237 

of  crude  petroleum,  234-242,  245,  246,  248,  249,  250,  253-261 

of  exported  oils,  227-228,  245 

of  fuel  oil,  227,  234-2  7,  245-247 

of  gasoline,  227,  234-237,  238,  241-244 

of  kerosene,  227,  234-237,  244-245 

of  lubricating  oils,  227,  234-237,  247-251 

relative  to  consumption,  253-255 

relative  to  cost  of  drilling,  241,  242 

relative  to  production,  253-261 

secular  trend  of,  257-261 

trend  of,  104-105 

types  of,  10.5-106 
Production,  of  petroleum  products,  84-88 

See  fiiel  oil,  gasoline,  kerosene,  lubricating  oils,  petroleum 
Production  of  crude  petroleum,  1,  4,  5,  48-63 

by  fields,  51,  55,  56,  57,  59 

competition  in,  31-34,  343 

decline  in,  45-47 

investment  in,  5-7 

relative  to  consumption,  58,  60,  61-62 

relative  to  country's  growth,  49 

relative  to  drilling,  44-45 

relative  to  price,  253-261 

seasonal  variation  in,  260 

trend  of,  48-63 
Profits  of  oil  industry,  10-11 

Ratio  chart,  advantages  of,  40 
Refineries,  by  states,  91-92 

capacity  of,  90-103 

complete,  79-82,  95 

cracking  plants,  82,  83 

growth  of,  92,  99-100 

intermediate,  79 

investment  in,  6 

location  of,  90-91,  96-97 

sizes  of,  90-93 

skimming  plants,  77-78 

topping  plants,  82 

trend  of  types,  83 

types  of,  77,  78,  93-97 

yields  from,  78 
Refinery  capacity,  90-103 

classified  by  types,  94,  95,  96-97 

growth  of,  99-100 

location  of,  90-91 

proportion  utilized,  100-101 

relation  to  storage,  94-95,  98-99 


INDEX  373 

Refinery  practice,  on  Mexican  oil,  327 

outline  of,  80-81 

trend  of,  75-89 
Refining,  efficiency  of,  345 

methods  of,  76-83 

outlook  for,  104-109 
Registrations  of  motor  vehicles,  263,  264,  266 
Requa,  M.  L.,  31,  32,  317 
Reserves  of  oil,  abroad,  22-26,  325-326 

control  of,  313-314 

in  Mexico,  325-326 

in  United  States,  18-21,  290,  306 
Review  of  Economic  Statistics,  259,  260,  357 
Richardson,  G.  B.,  153 
Rittman,  Jacobs,  and  Dean,  113 
Rocky  Mountain  field,  16-17,  21,  22 
Ross,  Victor,  5-6 
Russia,  oil-production  of,  52,  53 

Salt-water,  encroachment  of,  in  ^Mexico,  324-325 

relation  to  oil,  13 
Seasonal  variation,  in  gasoline  consumption,  126-128 

in  motor-oil  consumption,  181-182 
Shale-oil,  334-335 

See  oil-ahale 
Shale-oil  distillate,  295 

See  oil-shale 
Sievers,  E.  G.,  206,  207,  211 
Size,  of  oil  companies,  3-4 
I  of  petroleum  industrj',  4-5 

Skimming  plants,  77-79,  95-97,  145,  166 
Smith,  George  Otis,  20 
Smith,  N.  A.  C,  113 

Smithsonian  InstitutioJi,  195,  201.  339,  351 

Society  of  Automotive  Engineers,  19,  76,  115,  279,  282,  285,  297,  324,  345,  346 
Solid  fuel  obsolescent,  335 
Sparrow,  S.  W.,  293 
Sperlin's  Journal,  351 
Spurr,  J.  E.,  312 

Standard  companies,  3,  70,  215,  217,  218 
Standard  Oil  Company,  3-4,  213-215 

of  New  Jersey,  3,  194,  215 
Statistical  methods,  353-359 
Statistics,  accounting,  353-354 

economic,  355 

engineering,  354 

function  of,  353-360 
Stebinger,  Eugene,  23,  24,  25,  26 
Stewart,  Walter  W.,  49,  50 
Stocks,  of  asphalt,  188-189 

of  coke,  190-191 


374  INDEX 

Stocks,  of  crude  petroleum,  60-62 

of  fuel  oil,  148-151 

of  gasoline,  119-122,  128-129 

of  kerosene,  136-139 

of  lubricating  oils,  171-175,  17t/ 

of  wax,  185-186 
Stratford,  C.  W.,  66,  76 
Supplementary  motor-fuels,  279-284,  294-295,  298 

See  coal  refining,  oil-shale 
Swift,  F.  W.,  28 

Tank  cars,  1,  73-74 

number  of,  74 
Tank  farms,  67 
Tankers,  see  oil-tankers 
Technology'  of  oil  production,  28-29 
The  Nineteenth  Century,  350 
Thermal  efficiency,  296-297,  346 
Tide  Water  Oil  Company,  80,  81,  152 
Topping  plants,  82,  9-5-97,  145 
Towl,  Forrest  M.,  65 
Tractors,  distribution  of,  268 

production  of,  265 
Transportation,  1,  4,  5 

efficiency  of,  345 

investment  in,  6 

of  crude  petroleum,  64-74 

of  natural  gas,  198,  200-202 
Trends,  of  refinery  output,  83,  84 

of  refinery  tj'pes,  83 
Trucks,  distribution  of  farm-o'wned,  266 

production  of,  264,  265 

projected  curve  of,  287 
Types  of  petroleum,  12-13 

Uumined  supply  of  oil,  in  foreign  countries,  22-25 

in  United  States,  18-21,  290,  306 
U.  S.  Bureau  of  Foreign  and  Domestic  Commerce,  157,  228,  231,  328 
U.  S.  Bureau  of  Labor  Statistics,  233,  234,  235,  236,  237,  251,  253 
U.  S.  Bureau  of  Mines,  47,  77,  91,  92,  93,  94,  95,  96,  100,  101,  102,  112,  113,  115, 

122,  131,  138,  142,  166,  174,  184,  186,  188,  189,  190,  192,  194,  205,  220,  289, 

297,  312,  338,  344,  345,  346,  347,  350,  357 
U.  S.  Bureau  of  Standards,  300 

U.  S.  Census  of  Manufactures,  131,  142,  173,  184,  189,  192,  193,  252 
U.  S.  Department  of  Agriculture,  266,  268 

U.  S.  Fuel  Administration,  87,  89,  204,  213,  214,  218,  220,  223,  239  247,  249, 
U.  S.  Geological  Survey,  18,  19,  21,  22,  23,  24,  25,  32,  33,  34,  35,  36,  37,  38,  42,  43, 

52,  54,  56,  61,  66,  153,  158,  159,  187,  196,  197,  201,  206,  207,  208,  209,  210, 

211,  252,  289,  306,  336,  357 
U.  S.  National  Museum,  12,  183,  195,  204,  206 
U.  S.  Shipping  Board,  156-157 


INDEX  375 

U.  S.  Treasury,  47 

Value,  of  crude  petroleum,  251,  252 

of  fuel  oil,  107,  109,  251,  252 

of  gasoline,  107,  109,  251,  252 

of  kerosene,  107,  109,  251,  252 

of  lubricating  oils,  107,  109,  251,  252 

of  mineral  oUs,  107,  109,  251-252 
Van  Hise,  C.  R.,  203 

Wadsworth,  3.M.,  347 

War  Industries  Board,  123,  233 

Wastes,  342-352 

Wax,  184-187 

Wealth  of  country,  5 

Western  Society  of  Engineers,  301 

WTiite,  David,  19,  23,  26,  316 

Wild-catting,  27,  343 

World,  oil  production  of,  by  countries,  52,  53 

oil  resources  of,  22-26 
Wyer,  S.  S.,  195,  199,  200,  201,  202,  203,  204,  205,  206,  349,  350 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 

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This  book  is  DUE  on  the  last  date  stamped  below. 


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